September 5, 2006

 

China's wheat prices unchanged; trading volume down in south

 

 

China's wheat prices were flat last week, with trading volume continuing to decline in southern provinces, 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 being 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.

 

"Most state warehouses have stopped buying wheat in Anhui, Hubei and Jiangsu provinces, so as to leave some storage available for the harvest of rice," said Hai Yang, an analyst at Zhengzhou Esunny Information Technology Co.

 

Meanwhile, trading volume continued to pick up in northern provinces.

 

"Farmers in Hebei and Shandong provinces, who had been holding out for higher prices, became more active in selling to state warehouses last week, as the minimum purchase price plan will end in one month," said Zhang Liwei, an analyst at the China National Grain and Oils Information Centre.

 

"Trading in Henan province has been showing signs of slowing down, with the latest figures indicating that farmers have sold around 16 million tonnes of wheat so far," Hai said.

 

The summer harvest of wheat was around 28.5 million tonnes in Henan, according to Hai.

 

The government will determine wheat prices later this year, analysts said.

 

"The government is expected to hold around 60 percent-70 percent of total wheat stocks in China, thanks to the minimum purchase price plan," Hai pointed out, adding "it will be able to control prices by adjusting supplies to the market."

 

"Wheat prices may not drop to under the current minimum purchase prices, at which the government would suffer a loss," Hai added.