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Wheat futures to rise on increase in demand and government support

posted Nov 24, 2011, 5:11 AM by Puneet Goyal
Reuters Nov 21, 2011, 12.48pm IST

MUMBAI: India's wheat futures are expected to rise this week on increase in consumer demand and on support from the government's move to increase minimum support prices, analysts said.

India will pay nearly 10 percent more in 2012 over the current year to local farmers for buying wheat to ensure better returns to growers as inflation continues around 9 percent, the government had announced last week.

"Demand for wheat usually goes up during winter, and with the beginning of sowing in northern India, we expect it to recover a bit," said Badruddin Khan, associate vice president with Angel Broking.

At 12.27 p.m., the key wheat futures for December delivery on National Commodity and Derivatives Exchange(NCDEX) was trading flat at 1,211 rupees per 100 kg.

Wheat prices could touch 1,250 rupees per 100 kg in the current week tracking firmness in spot markets, Khan said.

In Khanna, a key spot market in Punjab, a major grower, wheat prices were trading flat at 1,297.7 rupees per 100 kg, data from NCDEX showed.

Under normal circumstances, future prices are at a premium over spot prices as the cost of storage is attached with them.

India, the world's second-biggest wheat producer, had recently allowed export of 2 million tonnes of wheat, after a gap of four years, though the move failed to arrest the downtrend in wheat prices.

India expects a record wheat harvest of 86 million tonnes in 2012, the farm secretary had said last month, raising hopes of exports for a second straight year from the world's second-biggest producer and consumer of the grain after China.

Wheat sowing in India has been completed in 7.6 million hectares in the current season as against 8.5 million hectares in the previous season, data from farm ministry showed.

The country had harvested 85.93 million tonnes of the grain in 2011.

On Oct. 1, wheat stocks in government warehouses were 31.4 million tonnes against a target of 11 million tonnes.