July 4, 2006

China's wheat stockpile may reverse six-year-decline

The increase of China's wheat output this year would end a six-year decline in the national wheat stockpile, said sources with China's national grain and oil information centre.

Li Ke, director of forecast section of the centre expects China's wheat stockpile to increase this year, with the supply exceeding market demand. The diminishing of the national wheat stockpile has caused China's wheat supply to tighten in the past several years.

Li said the greatest drop in China's wheat stockpile was seen between 2003 and 2004, when it fell by 20 million tonnes.

The national grain and oil information centre estimates the wheat stockpile to reach 105 million tonnes this year, an increase of 8 percent over the previous year.

The information centre predicted that China's wheat supply may exceed demand by three million tonnes next year.

More abundant supplies expected this year have resulted in a drop of wheat price in the China market.

However, prices were protected by the government-launched floor price in six major wheat-producing provinces during the wheat purchase season between Jun 1 and Sept 30, which helped stablise the market.

Summer grain production is the biggest factor influencing grain production in China. In the north, wheat is the decisive factor of the year's cereal yield.

Wheat output in Henan, China's largest production base accounting for a quarter of the country's wheat production, reached 28.44 million tonnes this year, 2.49 million tonnes more than last year.

Five million tonnes of wheat produced in Henan were purchased at the protective price. Annual wheat to be purchased at the protective price is expected to exceed 10 million tonnes.