Import duty, government procurement to support wheat prices during peak harvesting season: Angel Broking

Views of Mr. Ritesh Kumar Sahu (Fundamental Analyst - Agri Commodities, Angel Broking):

"After touching its lowest levels in 11 months during the second week of March, wheat futures set to recover for the second consecutive week as wheat procurement by government agencies at minimum support price (MSP) is gathering pace. Meanwhile, the imposition of import duty on wheat will support wheat futures in coming months as it prevents cheap imports into the country.

The most active wheat futures on the National Commodities and Derivative Exchange (NCDEX) gain more than 1.2 per cent to Rs. 1,671 a quintal on Tuesday, March 28, 2017 (4 pm), its biggest daily jump in six weeks. The volume increased to 663 lots of 10 MT each at 4 pm which is highest in the year 2017.

Wheat futures on National Commodities and Derivatives Exchange (NCDEX) fell more than 22.2 per cent to Rs. 1,609 per quintal recently since November 2016 due to higher production estimates by the government coupled with higher imports during FY 2016/17.

Wheat Futures touched all time high of Rs. 2,068 per quintal in November 2016 as the wheat stocks in government's central pool expected to drop to multi year low in 2016/17 due to higher open market sales the government following lower output during last two years.

Currently, wheat harvesting is progressing and high volumes of new supplies are reaching markets of Madhya Pradesh, Gujarat and Uttar Pradesh. New season wheat supplies have dragged prices below the minimum support prices (MSP) of Rs. 1,625 per quintal declared for wheat produced during 2016/17.

State-run Food Corporation of India (FCI) is going to procure on a massive scale to ensure the MSP to farmers. As per the latest announcement, government agencies has planned to procure 33 million tonnes (mt) of wheat in the current rabi season of 2016/17. This is almost 10% more than the procurement made in last season.

The government has imposed 10 per cent import duty on wheat with immediate effect arrent drop in wheat prices in the domestic market and protect farmers' interest, amid projection of a record crop this year. Last December, the government had reduced customs duty on wheat to zero from 10 per cent to boost domestic availability and check retail prices. Thus, within two months of reduction in customs duty, about 30-40 lakh tonnes of wheat have been imported while more than 55 lakh tonnes of wheat has been imported during financial year 2016/17."

Source : Equity Bulls

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