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  1. 1. Wheat
  2. 2. Basics – Wheat (Triticum)• Also called Gehun, Kanak, Gandham in Hindi, Gehun, Gahang in Marathi, Godhumalu in Telugu Godhi in Kannada Godumai in Tamil & Godamba in malayalam. Telugu, Kannada, malayalam• Most widely grown cereal grain in the world.• Mild, nutty flavour and gluten (a sticky protein) makes it very popular for use in baked products products.• As many as 25 species recognised in the world, only 3 species namely, T.aestivum/vulgare (Bread wheat), T.durum (Macroni wheat) & T. dicoccum (Emmer wheat) commercially grown in India. ) yg• Soil & Climate – Fertile soil & temperate climate• Grading - Based on Protein content (9-14%), based on Kernel texture (hard, semi hard, soft), based on Colour (white, amber, red) , ), ( , , ) www.mcxindia.com
  3. 3. Uses Food Products: Atta (Whole Meal), Maida (White Flour), Chapatis, Suji (Coarse Semolina), Rawa (Fine Semolina), Pasta, Bread, Biscuits, Cookies,Cracks, Noodles, Dalia, Vermicelli etc. Industrial Uses: Milling, Bread & Bakery, Adhesives, Coatings, Uses of Wheat Polymers & Resins, y , Cosmetic, Paper & Pharmaceuticals. Other Uses: Oth U Straw & Bran as Cattle Feed etc. In India, wheat consumption is manly in the form of homemade chapatis or rotis using custom milled atta,although usage of branded packaged atta is increasing in cities. Protein content - < 10% - used for cakes & cookies, 9 - 12% - used for chapatis & noodles, >12% used for macroni P i df k ki df h i dl 12% df i& white bread www.mcxindia.com
  4. 4. World Area, Production of Wheat www.mcxindia.com
  5. 5. World Crop Calendar www.mcxindia.com
  6. 6. Global Balance Sheet www.mcxindia.com
  7. 7. Major Exporters www.mcxindia.com
  8. 8. Major ExchangesBudapest Commodity ExchangeChicago Board of Trade (CBOT)China Zhengzhou Commodity Exchange (CZCE)Kansas City Board of Trade (KCBT)London International Financial Futures Exchange (LIFFE)Minneapolis Grian Exchange (MGEX)Multi Commodity Exchange of India Ltd. (MCX)South African Futures Exchange (SAFEX)Sofia Commodity Exchange, BulgariaSydney Futures Exchange (SFE)Winnipeg Commodity ExchangeZimbabwe Agricultural Commodity Exchange (ZIMACE) www.mcxindia.com
  9. 9. Facts About Wheat• India is the third largest wheat producer in the world after European Union – 27 & China China.• Wheat is grown in Rabi season starting from October and continues till December end.• Weather conditions in Haryana & Punjab plays a very vital role in ascertaining the final output. h l• Area under wheat cultivation hovers in the range of 25 – 29 million hectares.• Production from the last few years has been continuously good due to favorable weather conditions and increasing acreage.• USDA’s prediction for India’s wheat production for 2008-09 year is 77.5 million tonnes.• L Last years production was around 78 6 Milli tonnes. d i d 78.6 Million• The minimum support price this year was hiked to Rs1080 per quintal as compared to Rs 1000 previously. www.mcxindia.com
  10. 10. Indian Government Role in Wheat TradeIndian Government plays a key role in deciding domestic wheat market sentiments. sentiments It is mainly involved in food management with three basic objectives.• Procurement of food grains (mainly wheat and rice) from farmers at remunerative prices• Distribution of food grains to the consumers particularly to the vulnerable b d h l l h l bl section of the society at affordable prices• Maintenance of food buffers for food security and price stability.The instruments for food management are the Minimum Support Price (MSP) and Central Issue Price (CIP). The nodal agency which undertakes the procurement and distribution and storage of food grains is the Food Corporation of India (FCI). Punjab, Haryana, UP and MP are the major states which contribute to the central pool www.mcxindia.com
  11. 11. Government Procurement Data www.mcxindia.com
  12. 12. Minimum Support Price www.mcxindia.com
  13. 13. Wheat Spot Prices - Delhi www.mcxindia.com
  14. 14. Price Affecting Factors • Role of weather (temperature, rainfall) in crop production is immense key months being January & February. • Price tends to be lower as harvesting progresses and produce starts coming into the market. At the time of sowing and Weather Sowing Price before harvesting price tends to rise in view OMSS of tight supply situation. Rates Central Logistics Pool Stock • Changes in the minimum support prices (MSP). Harvesting MSP • Release of central pool stock and OMSS rates. t • Changes in logistics prices (transportation, Performance storage, etc) affects prices at major trading ce te s. centers. Note - Wheat has a weightage of 1 % in the wholesale price index f 1.38% www.mcxindia.com
  15. 15. Wheat Value Chain Countries End Consumer Exports Wheat Starch Total EndProduction Food/ Milling Flour Consumer Industrial Domestic Wheat Gluten Use Feed/ End Residual Consumer www.mcxindia.com
  16. 16. Indian Wheat Classification • Indian Wheat is largely soft / medium hard, medium protein (9 - 12.5%), bread wheat • Three species of Wheat namely (i) T. aestivum, (ii) T durum and (iii) T dicoccum namely, T aestivum T. T. are being cultivated in the country, as per details given as under :S.No. Species % Share of Production Major Growing Areasi T. aestivum 95% Uttar Pradesh, Punjab, Haryana, Rajasthan, Bihar, West Bengal, Assam, Parts of Madhya Pradesh, Himachal Pradesh Jammu & Kashmir Pradesh,ii T. durum 4% Madhya Pradesh, Maharastra, Gujarat, Southern Rajasthan and few locations in Punjab.iii T. dicoccum 1% Karnataka, Maharastra & Tamil Nadu www.mcxindia.com
  17. 17. Major Crop Growing States & Trading Hubs of India Shahjahanpur, Khanna, Ludhiana, Agra, Kanpur, Malout, Abohar, M l t Ab h Bareily, Bareily Jalandhar, Batala, Lucknow, Hapur Nabha Karnal, Sirsa, Hisar, Panipat, Dabavalli, Sonipat, Kurukshetra Ganganagar, Hanumangarh, Kota Kolkata Ahmedabad, Kandla Indore, Indore Hyderabad Moraina,Ujjain, Sihor, Itarsi, Nagpur, Sholapur, Hoshangabad, Bangalore Dhule, Khamgaon, Chatarpur Aurangabad Chennai UP, Punjab, Haryana, MP, Rajasthan, Bihar, Maharashtra, Gujarat, Karnataka, WB, Uttaranchal, HP & J & K - 99.5% of total Wheat production. Jharkhand, Assam, Chhattisgarh, Delhi and other NE States - only about 0.5 % of the total Wheat production. Source: Joint Agricultural Weather facility USDA / NOAA www.mcxindia.com
  18. 18. Marketing Season & Policy in India • Marketing season - begins from April (Baisakhi) every year • Major Policies - Minimum Support Price (MSP) - Central Pool Stock - Open Market Sale Scheme (OMSS) – Wheat for sale in open market by FCI - Government Agency. www.mcxindia.com
  19. 19. Marketing Channel in India Producer (Farmer) Marketable Surplus Shopkeepers / Moneylenders / Primary Wholesale Market y Itinerant Traders Buyer’s Commission Agent Seller’s Commission Agent (Pucca Arhatia) (Kutcha Arhatia) Terminal Market Wholesaler Government Millers / Retailers Fair Price Shops Consumers Source:- http://www.agmarknet.nic.in www.mcxindia.com
  20. 20. Interstate Movement of Wheat Despatches of Wheat from One State to Other States Sl. No. Feeder State Receiving States 1 Punjab & Haryana Andhra Pradesh, Bihar, Delhi, Gujarat, Karnataka, Kerela, Maharashtra, Orissa, Rajasthan, TN, WB h h h 2 UP Andhra Pradesh, Gujarat, Karnataka, Kerela, Maharashtra, Orissa, Punjab, Rajasthan, TN, WB, NE Region 3 WB Bihar, Gujarat, Orissa, UP, Punjab, Delhi, NE Region 4 Delhi Andhra Pradesh, Karnataka, Gujarat, Kerela, Maharashtra, Orissa, TN, NE region 5 MP Andhra Pradesh, Bihar, Kerela, TN, Delhi Source:- DGCIS, Kolkata www.mcxindia.com
  21. 21. Why Futures in Wheat• Wheat spot market is well developed in India that is a precondition for any commodity to be successful in Future trading.• Market has well developed breadth and depth with the presence of general consumer to wheat based industries that includes Wheat flourmills, Biscuits manufacturers etc.• Price Volatility is poised to increase in view of increasing consumption and consumption pattern for wheat. www.mcxindia.com
  22. 22. Wheat Futures @ MCX – Some Facts• Wheat, shows stable price movement, making it perfect for low risk stable return among commodities portfolio.• Trading Unit: 10 MTs• Price Quotation: Rs. per Qtl.• Tick Size: 10 Paise• Profit/Loss with change in one tick size: Rs. 10/-• Profit/Loss with change in price/unit by Re. 1: Rs. 100 www.mcxindia.com
  23. 23. Wheat Futures – The Participants - Hedgers• Hedgers – Can use futures as protection or insurance, against unfavourable price moves. Hedgers can protect themselves by taking an opposite position in the futures market to their exposed position in cash commodity.• Benefits of MCX futures are – • Establish purchase and/or sales prices in advance of physical transactions • Offer fixed forward pricing to customers • Lock-in profit margins • Establish a minimum selling price while maintaining the ability to participate in increasing prices prices. • Establish a maximum purchase price while maintaining the ability to participate in decreasing prices. www.mcxindia.com
  24. 24. Wheat Futures – The Participants - Speculators• Speculators – Speculators trade to capitalise on potential profit opportunities generated by a fluctuating market and by doing so so, accept risk that hedgers wish to avoid. Speculators play a vital role in futures trading by providing market liquidity, which allows hedgers to buy and sell the contracts they desire at current market prices. Speculators attempt to buy low and sell high, or sell high and buy low. Reasons for Reasons for SELLING BUYING futures futures contracts contracts Hedgers To lock in a price To lock in a price and thereby and thereby obtain obtain p protection against g protection declining prices against rising prices Speculators To profit from To profit from rising prices declining prices www.mcxindia.com
  25. 25. Wheat Futures – The Participants – Arbitragers• Arbitrage take advantage of price discrepancies between similar commodities in different markets.• Carrying charge + cost of receiving delivery + storage charges + cost of making d li ki delivery + price of wheat i th cash market i l i f h t in the h k t is lower th than th the price of a futures contract, then an arbitrage opportunity exists for company ABC to purchase wheat in the cash market and sell wheat in the p y C p futures market.Instead of buying an offsetting contract to fulfill its futures obligation, company ABC will make delivery of the actual wheat.• Arbitragers in the consumable commodity markets ensure the price discrepancy between the cash market and the futures market, or the basis, tends to b i t d t narrow. www.mcxindia.com
  26. 26. Thank You