June 15, 2012

China's Anhui begins wheat stockpiling

Anhui province of China has begun stockpiling wheat as market prices have dropped below the government-set minimum purchase price, the State Administration of Grains said Wednesday (June 13).

China Grain Reserves Corp., the state stockpiler, has told its warehouses in the province to start stockpiling, the administration said in a statement.

The government will pay farmers RMB2,040 (US$322) per tonne for the new crop, up 7%-10% compared with a year earlier.

Market prices in Anhui had fallen below the minimum purchase price, triggering the purchasing program, which is intended to protect farmers' profit margins and encourage production.

Despite market expectations for a modest decline in China's output this year, domestic wheat prices remain weak amid a slump in global commodity markets due to concerns over the world economy and European debt crisis, said Ma Wenfeng, an analyst with Beijing Oriental Agri-business Consultant Co.

Meanwhile, domestic wheat supply is still sufficient, as the government still has large inventories, Ma said.

Ma said he expects the government to begin stockpiling wheat soon in Jiangsu and Henan provinces, as prices there are low.