Last Updated : July 30, 2010 16:20
Wheat range bound on fresh buying
Wheat prices stayed range bound positive during July as dips were utilized as a fresh buying opportunity by the investors. However, fundamentally supplies are quite enough to meet the domestic demand. Let us illustrate some statistics.
World beginning stocks are expected to remain 165 MMT, up by 33 % from 200809. No significant change is expected in production. Total increment in supply is seen nearly 3 % up. Consumption is expected to rise moderately this year. The total use may rise just by 2 % from previous year.
World ending stocks are expected to remain near 193 MMT up by 17 % from last year. Stock to use ratio is high at 30 % as against 26 % in 200809. This generally favorable wheat supply outlook is likely to maintain some downward pressure on international prices in medium term.
However prices have come down reasonably thus not much correction is expected. In India, wheat beginning stocks are expected to remain a record high at 13.43 MMT, up by 132 % from 200809. Production is expected to marginally increase. Total supply is expected to rise by 12 % this year.
Consumption is expected to rise by about 10 % this year. Ending stocks are expected to remain near 16.10 MMT up by 20 % from last year. Stock to use ratio is high at 21 % as against 19 % in 200809.
Thus fundamentals of supply and demand suggest that the second half of the year may witness moderate sentiments in Indian wheat market. Indian wheat prices have remained more or less stable while world market prices have come down significantly Since January 2010. Despite the comfortable supply situation, wheat prices in the spot and futures market stayed firm during April to June.
It appears that government would like to wait and watch the monsoon progress in the near future so as to judge the sown area under kharif food grains crop. After that it will start releasing stocks from its buffer stocks in the open market so as to stabilize the market prices.
So far as the futures market is concerned, we expect that prices may ease to some extent during July month but later on, market would get buying support on lower levels. During whole marketing season highest levels (resistance) can be near 14001450. Wheat buying can be lucrative for long term investors if buying is initiated near 1200-1220 levels.
Courtesy: Religare Commodities
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