February 24, 2009

China's wheat prices in major producing areas were higher in the week to Monday (February 23), supported by expectations of higher demand.

White wheat prices in Dengzhou in the major producing province of Henan were around RMB1,800 a tonne, up RMB20/tonne from a week earlier.

Wheat prices in Shandong province were between RMB1,700 to RMB1,840/tonne, up RMB40.

Farmers were reluctant to sell their wheat due to expectations of higher prices, while most flour processing plants' stocks are low, said analysts.

Most traders and processing plants also expect the government to further increase its prices in weekly wheat auctions, the China National Grain and Oils Information Centre said in a note.

The government sold 1.38 million tonnes of wheat in last week's auctions, or 86 percent of the 1.61 million tonnes it planned to sell.

The average prices in each auction were RMB10 to RMB12/tonne higher than in the previous week's.

However, as a drought in northern wheat-producing provinces has eased, the market doesn't expect a drought-related drop in output to have much effect on the balance of supply and demand.

Meanwhile, the pace of recent increases in wheat prices has been slowing, so prices are likely to stabilize in the coming week, said Hai Yang, an analyst at Zhengzhou Esunny Information & Technology Co.