October 13, 2010

 

China ups purchasing price for wheat

China will increase the minimum government purchasing price for wheat in 2011, the National Development and Reform Commission (NDRC) said Tuesday (Oct 12).

 

The government will pay a minimum of RMB95 (US$14.20) for every 50 kilogrammes of white wheat, and RMB93 (US$13.90) for red and mixed wheat. That is an increase of RMB5 (US$0.70) for white wheat and RMB7 (US$1) for both the red and mixed varieties.

 

The move will encourage farmers to plant more wheat in order to stabilise the domestic market in the face of a fluctuating global environment and to ease inflation expectations, said analysts.

 

"Recent soaring global wheat prices have fuelled the expectation of a price hike in the domestic market," said Cheng Guoqiang, deputy director of the Institute of Market Economy at the Development Research Centre of the State Council.

 

The wheat price will rise along with the increased purchasing price, but it will set a benchmark for the domestic market and will maintain a stable pace, he said.

 

"Mild and controllable" prices will help ease inflation expectations, Cheng said. Rising grain prices are regarded as a major contributor to inflation.

 

Global wheat prices surged recently as a drought hit Russia, the world's third largest exporter, and floods damaged crops in Canada.

 

Earlier this month, the USDA reduced its forecast for world wheat production, saying that it may decline to 641.44 million tonnes, from a September forecast of 643.01 million. However, China is likely to see a bumper harvest, said Agricultural Minister Han Changfu during an inspection tour in Hebei province on Monday.

 

To date, 55 million hectares of farmland have produced yields accounting for 71.3% of China's harvest. The remaining land is also likely to produce good yields, according to Han.

 

China has maintained relatively high wheat stockpiles, helping to ensure food supplies and ease pressures on grain prices, said analysts.

 

Since 2006, the minimum government purchasing price for agricultural commodities has been raised during the sowing season to encourage farmers to plant more crops.

 

The year-on-year growth rate for the government's minimum purchasing price has remained at around 8% for three consecutive years, said Cheng.