September 19, 2006

 

China's wheat prices slightly up on higher demand

 

 

China's wheat prices last week were up slightly, as demand started to rise with the week-long National Day holidays on the horizon, analysts said Monday (Sep 18).

 

Wheat prices in major producing regions were quoted around RMB1,380-RMB1,460 a metric tonne, up around RMB20 from a week earlier.

 

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 was implemented Jun 1, buying by state warehouses at the government-set prices has accounted for over 80 percent of farmers' total sales, analysts said.

 

Prior to that, wheat prices were slightly lower than government-set prices.

 

"While state warehouse are still buying at set prices, flour plants and wheat trading firms have increased their purchase prices by around RMB20 to a range of RMB1,360-RMB1,460/tonne," said Zhang Liwei, an analyst at China National Grain and Oils Information Centre (CNGOIC).

 

"Demand for flour is increasing as the National Day holidays and the Mid-Autumn festival, one of major traditional Chinese festivals, are only two weeks away," he added.

 

Flour plants and trading firms usually buy wheat at lower prices than state warehouses do, because they are not very strict with quality and are relatively close to farmers geographically, according to analysts.

 

"Purchases by state warehouse have exceeded 40 million tonnes, or near 40 percent of the summer harvest this year," said Hai Yang, an analyst at Zhengzhou Esunny Information Technology Co, a local grain analysis firm.

 

The summer wheat harvest is expected to hit 99.3 million tonnes this year, according to the CNGOIC.

 

Chinese farmers usually stockpile up to 50 percent of their crops for their own consumption or for sale in the later part of the year.

 

Hai said rises in wheat prices will extend to next week, thanks to a steady recovery in demand.

 

"The demand for flour will continue to rise in the fall, traditionally the peak season for flour consumption," Hai said.

 

Zhang added, "Some of state warehouses have stepped up buying to build up stocks as the central government will carry out an inspection of stock levels of state-owned grain companies in September."