April 18, 2006

 

China wheat prices mostly steady; buying picks up

 

 

Wheat prices in China were mostly little changed in the week to Monday (Apr 17), with trading becoming more active, as industry players expect the government's minimum purchasing price policy to be implemented soon, analysts said.

 

"Some industry players expect it will come as early as mid-May, though there's still no official announcement yet," said Chen Kang, an analyst with the National Grain and Oils Information Centre.

 

He said they are afraid of higher prices in the future, once the prices are implemented...so they have sped up buying while prices are still low.

 

China announced this year's minimum purchase price for white wheat at RMB1,440 a  tonne and red wheat at RMB1,380/tonne at the beginning of March, hoping to protect farmers' income in the oversupplied market. However, it did not say when the new prices would be implemented.

 

Meanwhile, prices are lower than the prices set by the government.

 

In Henan, China's biggest wheat-producing province, prices of average quality wheat were mostly unchanged around RMB1,320-RMB1,380/tonne.

 

In Hebei, another major producing province, prices remained stable around RMB1,380-RMB1,400/tonne.

 

With the approach of the week-long Labour Day holiday at the beginning of May, wheat demand from mills is also rising, said analysts.

 

"It's true that more production lines at mills began operating, but the growth (of demand) is gradual," Zhang said.

 

"Therefore, prices would not change greatly in a short time because of this," he said.

 

Meanwhile, people are also closely watching the local weather and its impact on the crops, as drought in some places is threatening their growth, said analysts.

 

Otherwise, another good harvest year can be expected, which will in turn weigh on the prices in a market that has already seen good harvests in the past two years.