January 31, 2011

China sells wheat, soy to key firms to stabilise prices

China has sold soy, wheat and rapeseed oil from government reserves to selected crushers and flour mills at lower-than-market prices to ensure supply and stabilise prices, the State Administration of Grain said Thursday (Jan 27).

The direct sales programme, which is equivalent to subsidising food makers suffering losses from the government's price caps, complements the government's regular grain auctions, which are open to all buyers.

The direct grain and edible oil sales have a minimal impact on market prices, as the amount is very small, analysts said.

The government has sold about 350,000 tonnes of soy to Heilongjiang Jiusan Oil & Fat Co and Sanhe Hopefull Grain & Oil Group Co at about RMB3,500-3,600 (US$531-$547)/tonne, compared with market prices of about RNB3,800 (US$577)/tonne, traders have said.

It sold 450,000 tonnes of raw rapeseed oil to Cofco Group, Yihai Kerry Investment Co, Chinatex Corp at about RMB8,800 (US$1,337)/tonne, lower than market prices of about RMB10,000 (US$1,519)/tonne, they said.

Major flour mills, including Hebei-based Wudeli Flour Group, Beijing Guchuan Food Co and Cofco Group, have received another three million tonnes of wheat from China Grain Reserves Corp at lower-than-market prices, after getting a first batch of 2.8 million tonnes in December 2010, traders said.

In return for the below-market supplies, they have been told not to raise flour prices until the National People's Congress, China's parliament, convenes its annual session, which usually happens in March.