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Wheat Monthly Report

Oct, 2012

Executive Summary:

The main topic of conversation in the wheat complex last month was whether wheat priceswould come down in domestic market, export would continue in the range of $300 to $315 per Ton FOB basis and how much quantity would govt. allocate for bulk users to control the spirallingprices. Besides, likely wheat production and coverage area in 2012-13 crop year gained weightage for discussion among agri experts.

Govt.s intention to augment supply for bulk users and higher allocation for i ncoming monthshas softened wheat prices by Rs 150 per qtl in last two weeks. Higher allocations for domesticmarket, lower export demand and govt.s urgency to offload maximum wheat have changed theinner tone of the market. Wheat is likely to trade steady to slightly weak in the month ofOctober. Export will continue but with slow pace as prices offered by importers/multinationalsare not very attractive in comparison to Australia and USA. Appreciation in INR too hasimpacted adversely the pace of export.

Wheat sowing in India is likely to be delayed by two to three weeks this year due to latesowing of major kharif crops, especially paddy. However, no major impact on total areain comparison to last year seems to be in sight barring Gujarat, Uttrakhand, Jharkhandand Haryana. Better rainfall in last phase has provided adequate moisture level forwheat sowing. However, delayed sowing and likely lower availability of water just beforematurity stage in non irrigational growing areas may impact.

Higher temperature than normal in Feb, March and April unlike last year too mayreduce the final size of the crop. Overall view of farmers/traders received before sowingindicates lower production by 3 to 4 percent in comparison to last year. Weather

condition will play crucial role in deciding the final output. Farmers have startedpreparing wheat fields and sowing will start from mid Oct.

Domestic Market Dynamics:

Domestic wheat markets continued to trade range bound due to lower demand frombulk users like flour miller, exporters. Despite higher allocation through variouschannels upward correction is being seen in bench mark markets. Prices of wheat inRajasthan, Delhi, M.P., and Gujarat have improved to some extent. However, one sideduptrend is unlikely as higher allocation and expectation of higher area coverage may

restrict gain further.

Wheat area may improve this year as farmers have realized better price due to higherMSP and continuous export demand. Farmers pre sowing intention shows bettercoverage this year in Rajasthan as they prefer wheat sowing in guar field. Besides, thereis ample water available in Gandhi Sagar Dam and it will facilitate irrigation at maturitystage. However, area under wheat in Saurastra region may decrease drastically due to


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Oct, 2012lower rainfall in these regions. Almost 80 percent wheat area may be used for other cashcrops like chana, castor, cumin and cotton.

Wheat area in Punjab, Haryana, Uttar Pradesh and Bihar is likely to be stable likeprevious year. So there is no fear of any major decrease in total area coverage this year.However, temperature in Feb, March and April will be very crucial for deciding the finalsize of the crop. Weather remained favourable throughout the season last year and soIndia could realized the highest yield. Repeat of same weather condition is unlikely thisyear and resultantly the yield too. However, overall area may exceed 290 lakh ha. thisyear.

Exporters and private trade are likely to start buying once again from mid October whenprices are supposed to be stabilized in the domestic market. Supply and demand side islikely to remain balanced and so cash market too should trade steady. However, thegovt.s allocation will remain the major price driving force in the months ahead asmaximum stock is in govts custody. Marketable surplus with farmers too are depletingfast.

Agriwatch Revised Wheat Balance Sheet:

All units in million tonnes 2009-10 2010-11 2011-12* 2012-13*

Carry in 13.42 16.12 21.43 31.83

Production 80.80 86.81 93.90 90.00

Imports 0.15 0.00 0.00 0.00

Total Availability 94.37 102.93 115.33 121.83

Consumption 78.15 80.00 81.50 83.00Exports 0.10 1.50 2.00 4.00

Total Usage 78.25 81.50 83.50 87.00

Carry out 16.12 21.43 31.83 34.83

Av Monthly Consumption 6.51 6.67 6.79 6.92

Stock to Month Use 2.48 3.21 4.69 5.04

Stock to Consumption Ratio 0.21 0.27 0.39 0.42

*We have considered private stock too in the Crop Year 2011-12 & 2012-13

As per pre sowing intention and feedback received from agri experts wheat production

this year may dip almost by 4 percent on expectation of delayed sowing in paddyfiled,lower area coverage in Gujarat and area shifting in minor growing states to othercash crops.If production falls short by 3 percent, total production will come downby28.17 lakh tone,if it comes down by 4 percent, production may decrease by37.56 lakhtone from last year. if production decrease almost by 4 million T,it will not going toimpact total availability. Situation on storage front may be even more grimmer despiteproduction loss around 4 million T as the above given table shows.


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Oct, 2012Total availability of wheat will go up from 115.33 million tonne to 121.83 million tonne.Despite higher domestic usage (1.5 MMT) and 2 million tonne more export carryout willincrease 3 million T to 34.83 million T in 2013-14.

For maintaining carryout at current years level India need to ship out at least 7 millionT in this marketing year. Even Av monthly consumption, stock to month use and stockto consumption ratio have been continuously increasing as depicts the above givenbalance sheet. Higher export in the range of 6 to 7 million T will not hamper domesticavailability if release from govt.s stock remains systematic and based on requirementsin various regions. Regular release will ensure stability in the market.

Month wise wheat stock position in central pool:

Wheat stock with govt. as on 1st of the each month:

Fig.In

lakhT

Jan Feb March April May June July Aug Sep Oct Nov D

2010 230.92 206.23 183.88 161.25 337.13 351.62 335.84 320.47 298.62 277.77 255.58 2

2011 215.4 193.73 171.57 153.64 313.75 378.32 371.49 358.75 336.2 314.2 296.71 27

2012 256.76 234.25 212.55 200 381.94 489.7 498.08 475.26 461.6 431.53

100

150

200

250

300

350

400

450

500

550

Jan Feb March April May June July Aug Sep Oct Nov Dec

Fig

inl

akh

tonne

Monthwise wheat stock in centralpool

2010 2011 2012


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Oct, 2012Buffer Norms for wheat and rice:

As onBuffer Norms Strategic Reserve Grand

TotalRice Wheat Total Rice Wheat1st April 122 40 162 20 30 212

1st July 98 171 269 20 30 319

1st October 52 110 162 20 30 212

1st January 118 82 200 20 30 250

Wheat stock in govt.s granary is quite higher than actual requirement on 1st October as theabove given table shows. Against the actual requirement of 140 lakh T of wheat on 1st October,stock in central pool was registered at 431.53 lakh tonne, higher by three times and it may

complicate storage problem further in the months ahead as rice procurement has started nowand is expected to pick up in Nov. Offloading through export should be prioritized to lighten theburden of accumulated wheat stock in time. Higher allocation for domestic market will not beenough to cut the exiting stock pile down.

Indias Wheat Production in Global Context:-

YearWorld

Production inmillion ton

IndianProduction in

million ton

Indias % share inglobal wheatproduction

2001-02 584 72.77 12.46

2002-03 569 65.76 11.56

2003-04 555 72.15 13.00

2004-05 627 68.64 10.95

2005-06 619 69.35 11.20

2006-07 596 75.81 12.72

2007-08 607 78.57 12.90

2008-09 685 80.68 11.76

2009-10 679 80.80 11.90

2010-11 651 85.93 13.22

2011-12 696 93.90 13.50

2012-13 E 662 90.00 13.51

Indian wheat production share in global wheat production has been has been increasing steadilybuoyed by good monsoons, adequate procurement on higher MSP and increasing possibility of


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Oct, 2012higher export. Global production has seen dips more often due to changing weather patternsespecially in United States of America, Australia and Russia. The US, Australian and Russianproduction remains the major price driving force in the global wheat market.

The government holding of wheat stocks has been increasing each year and now stands at closeto more than a third of the production. This has bearing on the private stock availability fordomestic and international trade. Production figure for 2012-13 is preliminary estimate and may

vary depending on price, weather condition and other seasonal factors.

Wheat production and procurement YOY basis:

Wheat procurement continued to increase from 2008-09 and touched its record in2011-12 on back of higher production, higher MSP and govt.s policy of higherprocurement. Percentage of procurement against production reached almost 40 percentand created severe problem on storage front. Higher procurement supported by exportalso created supply crunch in domestic market before time and prices unexpectedlytouched Rs 1700 in the month of August. However, recent allocations and govtsintention to augment supply in the months ahead have cooled down the bullish trend.

0

20

40

60

80

100

2000-1 2001-2 2002-3 2003-4 2004-5 2005-6 2006-7 2007-8 2008-9 2009-10 2010-11 2011-12

Wheat Production and Procurement by Government in Million tonnes

Wheat Production Wheat Procurement by Government


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Oct, 2012

Av. Wheat price has cooled down in last 15 days and we expect price to stabilize at current level.Despite recent decline prices are ruling higher in comparison to last two years in the months ofSep-Oct. Likely higher release is expected to restrict market. Besides, better sowing prospectsand congenial weather will help market to trade at current level. However, lower release in themonth of Nov and Dec may support market. Traders are optimistic that wheat market willremain steady in the weeks ahead.

State wise price movement:

1200

1250

1300

1350

1400

1450

1500

15501600

1650

Jan Feb Mar April May June July Aug Sept Oct Nov Dec

R

s

p

e

r

q

u

i

t

a

l

Average price trend month wise

2010 2011 2012

900

1400

1900

2400

Fig.

inR

sperqtl.

State wise price movement

Prices Sept, 2012 Prices Aug, 2012 Prices Sept, 2011


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Oct, 2012

Price trend domestic market:

StatePrices Sept,

2012

Prices

Aug, 2012

Prices

Sept, 2011

%Change(Over

PreviousMonth)

%Change(Over

PreviousYear)A P 2225 2038.33 1813.33 9.16 22.7Assam 1406.56 1396.04 1200 0.75 __Chattisgarh 1321.6 1326.61 1195.41 -0.38 10.56Gujarat 1623.24 1687.22 1113.34 -3.79 45.8Haryana 1404.21 1344.19 1041.93 4.47 34.77Jharkhand 1532.09 1432.45 1353.53 6.96 13.19Karnataka 1744.54 1738.89 1609.75 0.32 8.37Kerala 2467.31 2416.67 2306.11 2.1 6.99MP 1511.06 1470.83 1077.62 2.74 40.22Maharashtra 1780.76 1827.87 1452.55 -2.58 22.6

Nagaland 1469.07 1452.34 1350 1.15 __Delhi 1487.98 1411.01 1151.43 5.45 29.23Orissa 1442.56 1343.21 1193.63 7.4 20.85Punjab 1344.23 1296 967.25 3.72 38.97Rajasthan 1470.54 1501.68 1075.22 -2.07 36.77UP 1415.34 1312.64 1042.77 7.82 35.73Uttrakhand 1347.85 1293.99 1122.41 4.16 20.09

West Bengal 1395.9 1247.47 1055.83 11.9 32.21Average 1577.21 1529.86 1285.76

*Report Generation: As per the data reported by APMCs

Av. Price of wheat increased significantly in the month of Sep. However, in second half itdeclined on higher release and better production prospects. Lower demand for export too hasimpacted current market fundamentals and we expect wheat prices to trade steady at currentlevel. However, govt.s release mechanism will remain crucial for price trend. Private stock isdepleting fast and major consumers will completely rely on govt stock in the months ahead.

FOB Indicative Quotes:

220

270

320

370

6/1/2012 7/1/2012 8/1/2012 9/1/2012

fig

in

$

perqtl.

Indicative FOB wheat quotes

US Gulf FOB France England Australia India

Ukraine Russia Argentina Canada


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Oct, 2012

Monthly whole sale price of wheat started firming up from mid June and touched its high inSept.end due to higher than expected offtake from domestic millers and exporters. Short supplyin cash market and export parity drove market up continuously. However, with govts allocationprices have cooled down. We expect price to be stable at current level.

Yearly Wheat Area and Production:

1100

1150

1200

1250

1300

1350

1400

1450

1500

1550

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Delhi Wholesale Monthly Prices

2010 2011 2012

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

Wheat Area (Mn Hectares) and Production (Mn Tonnes)

Area

Production


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Oct, 2012

Area under wheat has not increased in proportion to yield and total production in recent yearsas denotes the above given chart. Wheat productivity in major growing states has increasedconsiderably last year due to favourable weather and better agricultural practices. Yield

increased almost in every state.

Stock status with govt. and with farmers and traders:

Stock With Govt.Agencies

Stock With Govt.Agencies

Marketable surplusWith farmers

Stock with traders

June-12 48.97 4.5 0.8

July-12 49.80 2.5 0.5

August-12 47.52 1.5 0.2

Sept-12 46.16 1.0 0.2

Oct-12 43.15 0.8 0.1

Source: FCI and traders, Fig in million T

The above given table shows that maximum stock is in govt.s godowns . Even farmers stock toohas come down to 1.5 million T. It is lower by 5 lakh T from previous year till date as higher

2.40

2.50

2.60

2.70

2.80

2.90

3.00

3.10

3.20

Wheat Yield in MT/Hectare


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Oct, 2012prices encourage them to sell more in the month of July and August. Traders have minimumstock this year as they have shipped out maximum this year.

Indian FOB Quotes trend from Sep 2011 to Sept 2012 and export under OGL

Wheat export underOGL

Wheat (LakhT)

Average FOBQuotes(USD/MT)

CBOT AverageQuotes (USD/MT)

Oct-11 1.3 215.90 242.79

Nov-11 1.8 225.41 234.05

Dec-11 1.35 230.79 228.41

Jan-12 1.05 237.07 237.73

Feb-12 0.8 239.53 240.81

Mar-12 0.9 244.02 241

Apr-12 1.15 236.89 235.13May-12 2.55 252.15 236.73

Jun-12 3.45 256.64 245.82

Jul-12 3.1 296.12 318.27

Aug-12 3.75 310.07 328.89

Sep-12 2.1 314.48 327.44

Total 23.33 (Official)

Indian FOB quote is likely to increase further with strong global market fundamental.However, in domestic market FOB should hover in the range of $306 to $310 per metricT in Oct-2012.

Expected Price Range For Current month:

Market :Delhi Spot (mill delivery) Rs/per qtl.

Cash market (Steady) Rs 1500-1525

Future market (NovContract) Steady to weak Rs 1525-1550


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Oct, 2012NCDEX Future market:

Wheat Nov contract is unlikely to sustain at current level. Higher allocation, better cropprospects and lower export demand will weigh on the future market fundamentals. Market mayface tough resistance at 1550. The nearby support is 1450. Market is likely to trade in this rangein Nov contract.

International Trade Scenario & outlook:

The strongest wheat fundamental is found in foreign wheat production. The North China Plains

has suffered from a lack of moisture. The area of major concern is in the Black Sea Region.Updated Russian wheat production estimates keep decreasing. The last report registered 39-41million metric tons. This would slow down their wheat exports to 10 million metric tons. Many

believe this is a stretch. Rumors surfaced this week about Russia halting wheat exports in thenear future. With current information, these would just be rumors. On the demand side, wheatsales out of the United States are exceeding expectations. Usually, high prices chase away export

business and to a small extent this has occurred in the wheat. But, the weekly export sales report


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Oct, 2012showed 519,000 metric tons of wheat. Three countries, Japan, Mexico and Nigeria purchased

wheat in quantities over 100,000 metric tons. Their need was met with high quality wheat.

This years wheat market brings back memories of a couple of years ago when the wheat staged a

small rally right after harvest and thirty days later the price escalated into the fall. The cause wasa poor wheat crop in the Black Sea Region that took some time to recognize. Could history berepeating itself? At current improved weather condition global wheat market should stabilizenear $325 to $350 Per T. Wheat production is likely to dip next season and maize will continueto support wheat market in near and medium term. Market is expected to dip in the short term.

IGC Wheat Balance Sheet (As on 29.09.2012) (Quantity in MMT)IGC/29.09.12

2007-08 2008-09 2009-10 2010-112011-12

Estimated

Million TProjection for

2012-13

Wheat 23.08.2012 29.09.2012

Production 607 685 679 653 696 662 657

Trade 110 137 128 126 145 133 132

Consumptions 603 645 653 659 691 679 679

Carryover stocks 132 173 199 193 197 180 175

Y-O-Y change 5 41 26 -6 4 - -22

Major Exporters 47 69 78 72 70 54 51

CBOT Future chart:


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Oct, 2012

CBOT running contracts:

Indicative FOB Quotes:

CBOT Futures Prices: Date: 05.10.12

CONTRACTMONTH

5 Oct 2012Week ago

(28 Sept 2012)1 Month

ago(5 Sept)3 Month

ago(5 July)6 Month

ago(5 Apr)1 Year

ago

% Changeover previous

year

Dec-12 315.05 331.58 318.81 311.19 250.11 271.05 13.97

Mar-12 319.18 335.16 323.50 314.31 256.35 277.11 13.18

May-13 319.45 332.96 324.05 313.30 261.68 278.95 12.68July-13 308.71 318.54 312.84 310.18 262.78 271.69 11.99

Sept-13 310.09 319.18 313.21 310.36 266.82 276.84 10.72

Dec-13 314.13 321.38 315.41 314.04 272.15 279.78 10.94

Variety% Changeover Prev.

Year02.10.12

Week Ago25.09.12

Month Ago(September)

3 MonthsAgo (July)

YearAgo(Oct.)

USA (Chicago) RTRS 2srw 22.41 345.40 350.04 338.60 292.50 268

FranceFCW3 15.30 335.30 336.70 335.60 295.00 284

United Kingdom Feed wheat 15.14 322.90 329.60 323.30 285.00 274

Australia CWRS 30.91 351.72 349.00 344.42 305.33 243

Russia SRW 22.26 337.00 335.00 307.00 298.00 262

Canada(Spot) Q2FW 22.90 304.80 306.00 305.30 260.80 235

Ukraine SRW 22.46 334.00 332.50 309.50 295.00 259

Argentina SRW 21.60 338.00 345.00 340 285 265


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Oct, 2012

Overall view:

DISCLAIMER

Theinformationandopinionscontainedinthedocumenthavebeencompiledfromsourcesbelievedtobereliable.Thecompanydoesnotwarrantitsaccuracy,completenessandcorrectness.Useofdataandinformationcontainedinthisreportisatyourownrisk.Thisdocumentis

not,andshouldnotbeconstruedas,anoffertosellorsolicitationtobuyanycommodities.Thisdocumentmaynotbereproduced,distributed

orpublished,inwholeorinpart,byanyrecipienthereofforanypurposewithoutpriorpermissionfromtheCompany.IASLanditsaffiliates

and/ortheirofficers,directorsandemployeesmayhavepositionsinanycommoditiesmentionedinthisdocument(orinanyrelated

investment)andmayfromtimetotimeaddtoordisposeofanysuchcommodities(orinvestment).Pleaseseethedetaileddisclaimerat

http://www.agriwatch.com/Disclaimer.asp 2005IndianAgribusinessSystemsPvt.Ltd.

Wheat global market is likely to trade firm on back of lower IGC report,

lower carryout in US and lower exportable surplus in Australia and

Russia.

Concern over weather in major growing region and increasing demand for

feed wheat is expected to support wheat market in the medium term.

Global wheat market is likely to trade in the range of $335 to $375 per MT

in Nov Dec.higher maize price too is supportive for wheat market.

Long term outlook depends on corn prices and Russian export policy for

2013 amid weather development in various wheat growing countries.

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