Comex dances to Govt tune

Despite the crash in prices, traders are still bullish on wheat for the long term. ‘‘The government measure to open up wheat imports for private players will cool down prices in the short term. Wheat prices in the international market have shot up considerably due to shortage in production. Given the tight supply abroad, one has to see how importers are going to fulfil government’s intention of keeping the prices low in India,’’ said Suresh Nair, vice president, Kotak Commodities.

Major wheat producing countries like the US, Canada and Australia have reported that the current year production could be lower as a result of unfavourable weather condition. The ending stock is also tightening across the globe which in turn is driving up the international wheat prices.

Similarly, most of the sugar contracts also lost ground after the government’s decision to allow duty-free imports hit the market. Traders attributed the fall in sugar prices in the futures market as a knee-jerk reaction by uninformed investors. India’s total sugar supply in the current sugar season is expected at 23 million tonnes while consumption is pegged at 18-19 million tonne.

Though the government has allowed sugar imports at zero per cent, importers have to pay CVD (countervailing duty) at the rate of Rs 850 per tonne equal to the excise duty payable by the local mills. Any which way, traders are expecting very few imports to happen given the high international prices.

‘‘Brazil, one of the major sugar exporting countries, has cut down production significantly as the government announced special package to boost ethnol production. Add to this the crop failure in Cuba and Australia. These developments have affected the entire sugar matrix of the world,’’ said Sushil Sinha, regional head, Karvy Commodities.

The ban on pulses export also had a cascading effect on the NCDEX futures contracts. Major pulses like urad, chana and tur lost more than Rs 100 on a single day. ‘‘The loss in future prices has no logic as India is a net importer of all the pulses. The ban goes on to prove that the government will not shy away from doing whatever it takes to cool down spiralling prices,’’ said Sinha.

The government has recently allowed private players to import pulses at zero per cent duty. The chana spot prices in Delhi markets rose by almost Rs 76 per quintal after the government approved Pakistan government to import 51,000 tonne of chana from India. The government measures on pulses may contain prices for a maximum of four to six months as the arrival of next set of produce is going to dictate the prices in the market.