Increasing freight charges will cost India dear this year when it imports wheat.
India, the world's second-biggest wheat consumer, may import up to 5 million tonnes of wheat this year, said Union agriculture minister Sharad Pawar a few days ago.
If that happens, India may have to pay at least a third more than it did last year to buy wheat because of higher freight costs and an increase in global prices of the commodity.
The Central government may receive offers around $270 a metric tonne to import 1 million tonnes of wheat in a tender that closes on May 21. Last year, the Centre paid an average $205.31 a tonne.
India is buying wheat for a second year to boost reserves as demand exceeds production. The purchases come at a time when freight rates have climbed to more than a two-year high as China and India, the world's two most populous nations, buy more grain. Wheat prices have gone up 16% in the past year as bad weather damaged crops in US and Australia.
According to experts, the freight market is on the boil and it is going to make wheat expensive for India.
The Baltic Dry Index, an overall measure of commodity- shipping costs, has risen 48% this year. Cargill Inc, the largest US agricultural company, AWB Ltd and Glencore AG may offer to sell wheat at prices ranging from $260-$300 a tonne depending on the port of delivery and the origin of the wheat. They were among the companies that won bids last year to sell 6.5 million tonnes.
India's wheat output may exceed 73.7 million tonne. That may not be enough to cover demand forecast to reach 75.5 million tonnes.
Meanwhile, US exporters hope to sell up to 1 million tonnes of wheat to India this year, believing proposals to meet stringent tender specifications are being well received by New Delhi.
New Delhi imposed a number of conditions on how cargoes would be fumigated, inspected, and sampled.
A big sale to India could boost wheat prices in Chicago, while ringing alarm bells in Australia, which supplied the bulk of the wheat to India last year. A government delegation earlier this week held talks with US officials on wheat specification issues.