June 9, 2011

China's feed mills showed reduced interest in bidding for state feed wheat reserves at weekly government auctions on Wednesday (Jun 8), in anticipation of a bumper wheat harvest.

Only 13% or 39,276 tonnes were sold out of more than 300,000 tonnes of feed wheat on offer. The auction brings total sales to 740,325 tonnes since the government initiated feed wheat auctions late in March to ease tight corn supply.

The wheat was sold at an average price of RMB1,796 (US$277)/tonne, about 6% lower than the auction price of food-grade wheat from government reserves and about 15% lower than the market price of corn.

By June 6, farmers had completed 40% of the wheat harvest, with a projected improvement in output despite a drought earlier in the year.

Nie Zhenbang, head of the State Grain Administration, speaking during a tour of the major wheat growing provinces of Hebei and Shandong last week, called on the local grain authorities to be ready to stockpile the grain from farmers amid a bumper harvest, but did not give details.

China restricted bidding to some big feed mills and capped purchase volumes. The sales do not reflect a true picture of demand at feed mills.