China wheat prices stable; demand likely to remain weak

 

 

Wheat prices in China's major producing areas were mostly stable in the week to Monday (May 25), as demand picked up slightly due to dwindling stocks.

 

However, ample supply expected from the harvest that usually starts late this month and a weak consumption season have prevented prices from rising, analysts said.

 

Prices were unchanged from a week earlier in Zhengzhou in Henan province around RMB1,880 a tonne, and in Dezhou, Shandong province around RMB1,940/tonne.

 

 

Most processing plants in major producing areas are not willing to buy wheat actively as they don't expect flour sales to pick up significantly in the coming two months, it said.

 

Last Wednesday, the government sold 390,900 tonnes of wheat it had bought under the minimum purchase prices programme from previous harvests, or 22 percent of the 1.79 million tonnes it plans to sell.

 

The average auction price was RMB1,807/tonne, up RMB3 from a week earlier, and the volume sold was 34,600 tonnes more than the week ago.

 

China started May 21 its 2009 wheat purchase programme, under which the government will buy the new crop from the market at a minimum price if local rates fall below those levels.

 

The minimum purchase prices are 13 percent to 15.3 percent higher than the minimum purchase prices set last year, but the volume purchased is likely to be significantly lower than last year as the government still holds a large amount of wheat from previous years, analysts said.

 

So far this year, the government has only sold around 50 percent of the 42.02 million tonnes of wheat it bought in 2008, far less than the volume it had sold by the time last year, China Zhengzhou Grain Wholesale Market said in a note.

 

The Ministry of Agriculture has said that China's winter wheat output this year is likely to be the same or slightly higher than last year.