July 10, 2006

China wheat prices steady; trading volume increasing

China's wheat prices were little changed last week, as state warehouses continued to purchase from farmers at the government-set minimum purchase prices.

Wheat prices in major producing regions were quoted in a range between RMB1,380 to RMB1,440 a tonne.

Since the policy's implementation Jun 1, buying by state warehouses at government-set prices accounted for 90 percent of total farmers' sales, said analysts.

China's central government requires that state-owned warehouses in six major wheat-growing provinces buy white wheat at RMB1,440/tonne and red wheat at RMB1,380/tonne until Sep 30.

There would be a surplus of around 3.5 million tonnes in wheat supplies due to the harvest this year. The government set minimum purchase prices for wheat to protect farmers' interests, said Li Ke, an analyst with China National Grain & Oils Information Centre.

Wheat prices before June were slightly lower than the government-set prices.

Purchases from farmers keep increasing, which has strained the state warehouses in terms of storage space, Li said.

Wheat imports are expected to decline this year as domestic supplies are strong, Li added.