January 9, 2007

 

China's wheat prices flat; government sales have little impact

 

 

China's wheat prices were little changed the past two weeks, shrugging off rising supply, following a series of government sales.

 

Market participants said physical dealers had become comfortable with the regular government auctions as they realise that they are intended to ensure supply and stabilise prices, and that the government doesn't want to see prices fall significantly.

 

Prices of average-quality wheat in Henan province were quoted around RMB1,560 a   tonne, and those in Hebei province at RMB1,580-1,600/tonne, little changed compared with two weeks ago.

 

"Prices remained stable in most places around the country, despite the auctions," said an analyst at a government body, who declined to be named.

 

"The sales helped to alleviate the temporary shortage (of wheat), which occurred at the end of last year, and more auctions to be held will help to ensure supply for the coming Chinese New Year," said the analyst.

 

Demand for wheat usually peaks around the Chinese Lunar New Year, which falls in late February this year.

 

China decided to hold auctions of wheat bought under the minimum purchase price programme last year on a regular basis to ensure stable supply.

 

"We'll likely see a rather balanced market before the Spring Festival," said a futures trader.

 

"Longer-term speaking, wheat prices are underpinned by estimated falling global output this year," the trader said.

 

He added that there was market talk that the drought in Shandong province late last year resulted in smaller acreage for winter wheat, which will likely affect output in 2007.

 

Shandong province is one of the three major wheat growing provinces in China.