Flour mills in India have contracted for import of about 5,00,000 tonnes of Australian and French wheat this year for shipment between July and September despite ample stocks at home and a hike in import duty imposed by the government.
A reduction in domestic wheat supplies due an expected shortfall in foodgrain production as several wheat-growing regions are under severe drought-like conditions also prompted imports, say market sources.
Severe drought-like conditions and unseasonal rains have combined to push India's 2016-17 wheat output down to the lowest since 2011 and this could cause a surge in imports, according to traders.
Speculators are expecting to profit from cheap Australian and still cheaper French wheat if there is a big fall in domestic production. They also expect the government to remove the 25 per cent import duty on wheat in case of an expected domestic shortfall.
The bulk import deals are struck over the past few weeks and millers are to pay between $237 and $243 per tonne, including cost and freight, for Australian prime wheat with 12.5 per cent protein content. For French wheat with 11 per cent protein, millers are paying around $200 to $205 per tonne.
Millers are reported to have 350,000 tonnes of Australian wheat and 150,000 tonnes of French wheat.
India's wheat production is expected to fall short of the official target of 94 million tonnes as a second year of drought and unseasonal rains hits yields. Traders say India's wheat production is expected to be at least 5 million to 6 million tonnes lower than the target.
Last year, the country produced 86.53 million tonnes of wheat.
Flour mills have been depending on the huge stocks of wheat that government agencies have built up over the past few years of bumper harvests, without which they would have been importing more of the grain.
Meanwhile, official figures showed that recent government purchases of new-season wheat have helped increase the national stocks of the grain to 31.4 million tonnes as of 1 May, more than four times the buffer stock target of 7.4 million tonnes.