Govt Bets On Falling Corn Prices To Rub Off On Wheat

New Delhi: Even as there is every possibility of bidders quoting upwards of $310 per tonne cost & freight in the State Trading Corporation of India's (STC) latest 10 lakh tonne (lt) wheat import tender, the Centre is counting on the declining trend in international corn (maize) price to rub off on wheat. But witnessing the way corn prices have fallen, there is bound to be some adjustment in wheat as well. Currently, soft red winter (SRW) wheat futures for September at the Chicago Board of Trade (CBOT) is ruling at about $6.2 per bushel, against $3.5 for the same month's corn contract. The only other time when the wheat premium over corn reached the present levels was in July 1996, when it crossed a record $ 2.9 per bushel (one bushel equals 27.216 kg). Wheat prices are normally linked to corn via the feed grain route. In recent times, high petroleum prices have led to diversion of corn for manufacture of fuel ethanol. Lower availability of corn for feed has, in turn, generated higher demand for wheat as feed, pushing up its prices as well. Logically, a spread of $2.7 a bushel over corn would make wheat too costly for animal-feed use and, thereby, reduce demand and bring down prices.