December 5, 2006

 

China's wheat prices mostly stable; tight supply eases

 

 

China's wheat prices were mostly stable last week, with small rises in some regions, as government wheat auctions largely eased a supply shortage, analysts said Monday (Dec 4).

 

Prices of average-quality wheat in major producing regions were quoted around RMB1,440-1,600 a tonne last week, almost unchanged from a week earlier.

 

"Supplies are relatively abundant in the market, thanks to auctions of wheat from state reserves held recently," said Wei Bin, an analyst at the China National Grains & Oils Information Centre (CNGOIC), under the State Grain Administration.

 

"Increased prices due to tight supplies were witnessed only in some remote areas," he added.

 

Henan, Hebei and Anhui, which are China's three major wheat producing provinces, sold a total 932,300 tonnes of wheat in auctions held Thursday.

 

Wheat prices will likely stay stable despite the year-end demand as the government is expected to hold more auctions soon, local analysts said.

 

"Consumption of flour will rise toward the end of year, which is expected to increase demand for wheat in December," said Hai Yang, a local grain analyst at Zhengzhou Esunny Information Technology Co.

 

However, "wheat prices will not see significant rises over next few months, with the government expected to provide sufficient supplies through auctions," she added.

 

To protect farmers' incomes, China's central government designated state-owned warehouses in six major wheat growing provinces to buy wheat at minimum purchase prices of RMB1,380-1,440/tonne from June to September so that wheat prices won't slump after a good harvest this year.

 

China's output of winter wheat was around 99.3 million tonnes this year, up 9 percent on year, according to the CNGOIC.

 

Wheat purchases by state-owned warehouses were over 40 million tonnes during this period, which effectively made the government a monopoly supplier in the market.

 

The government holds auctions to release its stocks to the market, with the first auction held Nov 3.

 

The next auction of wheat from state reserves will be held Thursday, according to local traders.