India has bought up to 80,000 tonnes of Australian wheat in recent deals, three trade sources said on Tuesday, the biggest such imports by the country in five years as unseasonal rains damage the crop at home.
Purchases by the world's No.2 wheat consumer and producer could buoy benchmark Chicago prices, which rallied more than 6 percent in the past two sessions and are currently near a one-week top amid concerns over dry weather and rising temperatures hurting the U.S. winter crop.
Indian flour millers have bought between 70,000 and 80,000 tonnes of Australian prime wheat for April-May shipment at $260-$265 a tonne, including cost and freight.
"They have bought three cargoes as some mills are taking coverage because of reports of rain damage," said one Singapore-based trading manager with an international trading company.
"We don't expect India to buy large volumes as they have substantially large stocks but there could be some demand for higher grade wheat."
India imported around 200,000 tonnes of wheat in 2010, U.S. Department of Agriculture data shows, and purchases since then have been low because of bumper domestic production.
But wheat output and overall crop quality is seen taking a hit this year following heavy, untimely rain in northern and central grain-growing parts of India just before the harvest. Traders said the top high-protein wheat producing states of Madhya Pradesh and Rajasthan have seen worst damage.
While it is too early to estimate the extent of damage to the wheat crop, winter crops in more than 10 million hectares could be hit, government officials said.
India could be in the market for more shipments although large stockpiles in government silos may cap purchases.
Stocks lying with the state-run Food Corporation of India totalled 19.52 million tonnes on March 1, substantially higher than a target of 4 million tonnes.
Still, some of the stocks, which are more than two-year old, may be of average to lower quality.
In addition to the rain-damage, Indian millers are importing also because of global freight rates that plunged to a record low last month.
"At times some port-based flour millers in southern India import high-protein wheat from Australia to take advantage of freight rates and lower global prices," said Prem Gupta, a senior member of the Roller Flour Millers Association of India.
"If international prices are lower, it becomes economical to import rather than get cargoes transported from the main production centres in central or northern parts of India."