July 18, 2006

 

China wheat prices flat; farmers selling stocks to state

 

 

China's wheat prices remained flat last week, as farmers continued to sell their stocks to state warehouses at the government-set minimum purchase prices.

 

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

 

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

 

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

 

"Demand for flour is relatively sluggish this year, which is weighing on wheat prices." said Pan Wei, an analyst at Dalu Futures Co.

 

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

 

"Farmers have sold 70 percent-80 percent of their stocks to state warehouses in major wheat producing regions," Pan said.

 

However, the situation is somewhat different in northern Hebei Province.

 

"While farmers in other provinces rush to sell to state warehouses, Hebei farmers are still holding up to 80 percent of their crop in stocks," said Hai Yang, an analyst at Zhengzhou Esuuny Information Technology Co. "The wheat harvest in Hebei has not been as plentiful as other wheat producing provinces," Hai said, adding that the purchase price in Hebei last year was around RMB1,460-RMB1,500/tonne, which is significantly higher than this year.

 

As a result, she said, farmers in Hebei are holding out for higher market prices for their crop.