November 21, 2005

 

China wheat prices largely steady; slow trade, demand average

 

 

Wheat prices in major producing regions in China were largely steady in the week to Monday, as trading was slow because flour mills have been buying only for near-term use, reluctant to build up stocks amid average flour demand.

 

In Henan, China's largest wheat-producing province, average quality wheat was quoted about RMB1,400-1,450/tonne Monday, mostly steady from RMB1,400-1,440/tonne a week ago.

 

Prices for average quality wheat were quoted about RMB1,420-1,460/tonne in Shandong province, little changed from RMB1,420-1,470/tonne a week ago.

 

Wheat prices in Hebei, a province that bordered the Chinese capital Beijing, ranged from RMB1,440-1,500/tonne, unchanged from a week ago.

 

Traders said the market was a little oversupplied as buying was average but selling stepped up recently, especially from government warehouses.

 

Many government warehouses began to sell old stocks, either openly or privately, as these stocks were not allowed to be sold in the summer.

 

Earlier this year, the Chinese government ordered grain companies, especially central and provincial ones, to buy new wheat and refrain from selling their old stocks, to reduce oversupply in the market and support wheat prices, which had been on a decline.

 

Under normal circumstances, these grain companies sold their old wheat stocks before buying new wheat.

 

"These companies may want to dump their old stocks during the winter season when demand is often higher," one trader said. "But the seasonal pattern seems to have weakened since last year, as people don't consume as much flour products as they did in the past."

 

"Wheat prices are likely to be weak again this winter, just as in last winter," said a Jinan-based grain trader.