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STC issues another controversial wheat tender

August 24, 2007 16:35 IST

The controversy over wheat imports is refusing to die down. In yet another questionable move, the State Trading Corporation of India on Thursday floated global tenders for import of unspecified quantity of wheat at a time when the prices of the commodity are ruling at a record high.

The tender says that the wheat could be delivered between October and December. The move comes at a time when global prices have surged to all-time-highs, raising the possibility of the Centre shelling out well over 0 a tonne in the event of imports being contracted at current rates.

Moreover, STC's latest tender, unlike previous ones that were for specified quantities, seeks bidders to offer the maximum quantity of wheat on a port-wise basis for each of the three months.

According to the tender notice, the shipments can be in both bulk vessel loads as well as in containerised cargo.

The parcel size has been set at 25,000-75,000 tonnes for Mundra and at 25,000-50,000 tonnes for the other seven designated ports of Kakinada, Kandla, Mumbai, Chennai, Visakhapatnam, Tuticorin and Kochi.

The tender closes on August 29, with the offers being valid till September 9.

The timing of the latest tender is significant, considering that the benchmark December wheat Futures contract at the Chicago Board of Trade (CBOT) is currently quoting at a record $7.43 a bushel or $273 a tonne (one bushel equals 27.216 kg).

Likewise, November milling wheat at the Euronext.liffe exchange has crossed 235 Euros or $317 a tonne. Even the less-preferred wheat of Russian origin is hovering at well over $300 a tonne free-on-board while the rates are $285-290 for Canada.

To put these prices in perspective, it may be noted that when STC's last import tender was issued on June 26, CBOT rates were ruling at $6 a bushel ($220 a tonne), while Russian wheat was being offered for $235 a tonne.

On top of these, the freight costs from Russia and France work out to $60-65 a tonne, and $80 from the US. Hauling Canadian wheat will cost $80-85 a tonne in Panamax vessels and up to $100 a tonne in smaller Handymax ships.

After adding all other costs (including risk premium on STC/Government tenders, arising from demurrage costs and other charges that are not compensated), the landed cost of imported wheat this time will be $400 plus or Rs 16,000 a tonne at port.

This would be way above the average price of $325.59 a tonne contracted in the last tender and even more compared to the earlier ones.

Domestic prices, on the other hand, are ruling much lower, with wheat dara in Delhi quoting at Rs 10,060-10,080.

Mills in the south are also able to source wheat at Rs 12,000-12,300 a tonne in their godowns.

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