May 23, 2011

China unlikely to make wheat reserve purchases this year

China is unlikely to start a programme to buy wheat from farmers at government-set minimum prices for state reserves this year, as market wheat prices are well above the protective level, the State Administration of Grain said Friday (May 20).

In October of last year, the government set this year's wheat purchase prices for state reserves at RMB1,860-1,900 (US$286-292)/tonne, up to 8% higher than a year earlier, to protect farmers' interests. Market wheat prices are now around RMB2,150 (US$331)/tonne.

The administration expected good harvests of wheat and rapeseed this year, but prices of wheat and rapeseed oil will likely be stable and remain at high levels after the current harvest is completed, it said in a statement, without mentioning the highly-anticipated government purchase prices for rapeseed.

Market talk that China Grain Reserves Corp will buy rapeseed at RMB4,500-4,600 (US$693-708)/tonne, up sharply from last year's RMB3,900 (US$600)/tonne, drove benchmark January rapeseed oil futures up on Zhengzhou Commodity Exchange to settle Friday at RMB10,506 (US$1,617)/tonne, a three-week high.