August 29, 2006

 

China's wheat prices flat; trading slows on limited storage

 

 

China's wheat prices were mostly unchanged last week, while trading volume dropped due to limited storage at state warehouses, analysts said.

 

Wheat prices in major producing regions were quoted around RMB1,380-RMB1,440 a tonne.

 

In the hope of protecting farmers' incomes, China's central government has designated state-owned warehouses in six major wheat-growing provinces to buy white wheat at RMB1,440/tonne and red wheat at RMB1,380/tonne until Sep 30.

 

Since the policy began to be enforced Jun 1, buying by state warehouses at the government-set prices accounted for over 80 percent of farmers' total sales, according to analysts.

 

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

 

"Trading volume declined because in some areas, state warehouses were so constrained for storage that they had to reduce purchases," said Zhang Liwei, an analyst at China National Grain & Oils Information Centre.

 

Hai Yang, an analyst at Zhengzhou Esunny Information Technology Co, agreed, adding that many state warehouses in Henan, Jiangsu, Anhui and Hubei provinces have virtually halted buying, as they have no more room to store wheat.

 

"In the regions where state warehouse were not able to acquire all the wheat that farmers wanted to sell, some flour companies took the opportunity to buy at lower prices," Zhang said.

 

But "prices will not fall too much after state warehouses stop buying at the government-set minimum prices, as farmers have sold most of their stocks available for sale," Zhang said.