February 4, 2004

China's Wheat Prices To Remain High

Wheat prices in China are likely to continue its current upward trend to remain at above 1,400 yuan/ton, experts predict.

Their predictions are based on three factors:

The situation of the current-year output of wheat cannot meeting current-year demand has remained for four years running. The accumulated supply shortage of wheat since 2000 has exceeded 60 million tons, all of which have been made up for by inventory. As a result, wheat inventory has dropped sharply.

There are two hidden dangers with China's wheat inventory structure at present. First, the figures of many local reserves are unreliable. Second, wheat prices have remained at a low level for years and wheat inventory in many sales areas and many processing units is zero.

Once the supply and demand of wheat is reversed, wheat market will be in short supply for a long time to come.

From mid-October 2003 to the present, spot price of wheat has soared by 30 per cent. The buyer's market that has stayed for year will become a seller's market overnight.