May 8, 2006

 

China wheat prices little changed as farmers await fixed price policy

 

 

Wheat prices in China were little changed Monday from two weeks earlier, as buying from mills slowed.

 

"Since the beginning of the week-long holiday, mills have began to buy less, as they had enough stocks for the holiday," said Chen Kang, an analyst with National Grain & Oils Information Centre.

 

Meanwhile, farmers and traders were reluctant to sell, as the market expects minimum purchase price policies to be adopted soon.

 

"It's very likely that the time is at the beginning of June," said a trader at a state institute that monitors grain prices.

 

In early March, China announced that the 2006 minimum purchase price for white wheat is at RMB1,440 a tonne and red wheat at RMB1,380/tonne.

 

With prices presently lower, the government is expected to soon step into the market to pick up wheat at the minimum purchase prices to protect farmers' income in an oversupplied market.

 

In Henan, China's biggest wheat-producing province, prices of average quality wheat were quoted at around RMB1,320-RMB1,380/tonne, unchanged from two weeks earlier.

 

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

 

Chen also said prices are likely to slightly fall in May, as farmers may sell more of their stocks to make room for the upcoming harvest.

 

"Farmers are likely to accelerate their selling, which may result in increased supply and prices may fall slightly accordingly," he said.

 

"Any big price change is less likely," as market participants expect the government-set minimum purchase prices to be adopted soon, Chen added.

 

Although different areas in China have been hit by a sudden drop in temperatures recently, as well as drought-like conditions which impacted output, Chen said the National Grain & Oils Information Centre is still optimistic about this year's harvest.