July 26, 2011

Wheat prices in China's major producing regions were stable in the week to Monday (Jul 25) as most buyers stayed on the sidelines due to credit crunch.

Prices in Zhengzhou in Henan province - China's largest producer with about a quarter of total production - were around RMB2,090 (US$324)/tonne, unchanged from a week earlier.

Prices in Jinan in the eastern province of Shandong, China's second-largest producer, were also RMB2,090/tonne.

Grain dealers, who usually buy wheat from farmers and resell to bigger enterprises or state stockpiler Sinograin, are not receiving cash for their sales due to the credit crunch, traders said.

Flour mills, most with low inventories, also lack funds to restock, they said.

A lack of credit in the market is one of the main factors limiting wheat purchases by small- and medium-sized flour mills, analysts said.

Most buyers and sellers are behaving cautiously, looking to the government for guidance, they added.

China will not allow state stockpiler China Grain Reserve Corp or Sinograin, to buy wheat at the government-set minimum of RMB1,860-1,900 (US$289-295)/tonne until market prices drop to that level.

Sinograin purchased 22.4 million tonnes of wheat last year for - around 20% of total output - making it the largest wheat buyer in China, according to government data.