February 3, 2009

Wheat prices in China's major producing regions are higher compared with two weeks ago due to slow sales by farmers ahead of the holiday, and will probably remain steady in the coming weeks, traders and analysts said Monday (February 2).

Wheat prices in Shandong and Henan, the two biggest producing provinces, are quoted around RMB1,840 a tonne, up from RMB1,780/tonne before the week-long Chinese New Year holiday last week.

During the week before the Chinese New Year holiday, farmers slowed their sales, and the lower supply drove prices up slightly, said an analyst in Beijing.

"Usually after the Chinese New Year, prices likely to fall slightly, as ample stocks built by flour mills damp buying interest, but as there were no apparent stockbuilding activities this year ahead of the holiday, prices will probably remain steady," he said.

Despite sufficient domestic stocks following another bumper harvest last year, analysts expect prices to remain steady thanks to supportive measures by the government.

Chen Xiwen, deputy director at Communist Party's leading panel on finance policies and agricultural issues, told a media briefing Monday that the government will increase state reserves if prices fall due to oversupply, and it supports the holding of reserves by industry firms.

"Because we've had five consecutive years of good harvest, domestic grain supplies are sufficient...If there is international demand, China will appropriately increase the exports of some grains at reasonable price," Chen added.

Meanwhile, drought in Henan province persists.

The Ministry of Agriculture said Sunday on its Web site there hasn't been any major precipitation since late November, and the dry weather has seriously affected winter wheat growth.