February 17, 2006

Old wheat snapped up in China's Jiangsu auction

China's eastern Jiangsu province sold all 94,857 tonnes of old wheat put up for auction Thursday, at an average price of RMB1,100/ton, an official with auctioneer Jiangsu Grains Trading Center said Friday.

"The (average) price is much higher than we had expected," said Kong Jin, head of the center's grains reserves department.

The highest price for the old wheat, which entered the province's reserves before 1998, was RMB1,200 a tonne, while the lowest was the floor price of RMB600 a tonne.

"We thought the average price would be RMB900 a tonne to RMB1,000 a tonne, as it's old wheat," Kong said. "Their bidding prices were so surprising."

Prices of average quality new wheat in Henan, China's biggest wheat-producing province, were around RMB1,430 a tonne Thursday.

The auction attracted 54 feedmeal processors from around the country.

The old wheat will be used for feed production, Kong said, so some processors might deem prices to be acceptable, in view of high corn prices.

Corn prices can reach RMB1,200-RMB1,300 a tonne for processors, and given the bullish futures market, traders expect prices to rise further.

China's Jilin province will auction a total of 1.8 million tonnes of old grains from Feb 23 to Feb 24, including 10,000 tonnes of old wheat and 1.25 million tonnes of old corn. The auctions are aimed at reducing stocks at warehouses before the arrival of new grains.