January 20, 2009

Wheat prices in China's major producing areas were stable in the week to Monday (January 19), remaining steady for a fourth consecutive week.

Wheat prices in Caoxian in Shangdon province were around RMB1,780 a tonne, unchanged from a week ago.

Wheat prices in Nanyang in Henan province were around RMB1,700/tonne, edging up from RMB1,670/tonne a week ago.

Uncertainty related to dry conditions in four major wheat-producing provinces - Shandon, Henan, Shanxi and Hebei - may also help to keep the grain's prices stable this week, analysts said.

Analysts said the stock building that has helped to maintain stable spot prices has almost come to an end as demand usually peaks ahead of the Chinese New Year, which occurs this year on January 25.

"If the drought further deteriorates, that would help shore up cash prices for the crop" in the near term, said Dong Jianye, an analyst with Tianji Futures.

However, February and March are traditionally low wheat consumption season, so "that may offset some of the upward momentum from drought in those areas," said Dong.

Wheat prices are likely to remain stable and trading volume low this week, before the Chinese New Year holidays next week, analysts said.