ANALYSIS - Bulging stocks will limit Indian wheat imports

By Naveen Thukral and Himangshu Watts

SINGAPORE/NEW DELHI (Reuters) - Indian importers have bought small volumes of Australian wheat in recent weeks, the first such purchases in two years, but bulk purchases are unlikely as stockpiles amount to nearly 3 times reserve targets.

The imports of wheat in containers this month, which took the market by surprise, were triggered by firming local prices, which have jumped 19 percent this year, and global supplies that are around 15 percent cheaper for mills in southern India.

But soon after the deals, New Delhi made clear that it saw no pressing need to import large quantities -- at least until a clearer picture about the new crop emerged.

"I am absolutely not gung-ho on India importing wheat," said Atul Chaturvedi, head of the agricultural arm of Adani Enterprises Ltd, a leading Indian commodities trading firm. "The government is sitting on a massive stockpile of wheat."

Three good harvests and export curbs have helped government agencies accumulate wheat stocks of 28.2 million tonnes by October 1, against a target of 11 million tonnes.

Still, the government, which sets the price of grains it pays to farmers, has further pushed up the cost of Indian wheat with an increase of nearly 2 percent in the support price, to 11,000 rupees a tonne, for the crop to be gathered in April.

This encouraged millers in southern India to import wheat in containers from Australia at around $300 a tonne, including cost and freight, compared with the domestic price of about $350.

Mills in southern India find it cheaper to import from Australia, compared with moving the grain from northern growing regions, which would include a huge transportation cost.