December 12, 2006

 

China wheat prices stable; downside likely on auctions

 

 

China's wheat prices remained stable in the week to Monday in most regions, as state auctions helped alleviate tight supply, but analysts said more scheduled auctions are raising the risks of downside for the near future.

 

Prices of average-quality wheat in major producing regions, such as Henan, Shandong and Hebei provinces, were quoted at RMB1,520-1,580 a tonne, which were little changed compared with the previous week.

 

China has sold a total of 2.6 million tonnes of wheat through auctions since early November, which has effectively tamed high wheat prices.

 

The wheat came from a total of 43 million tonnes of interim state reserves bought under the country's minimum purchase price programme earlier this year.

 

"Wheat prices are moving towards the average price of the auction, but it's unlikely to see big slumps," said Wei Bin, an analyst at the China National Grains and Oils Information Centre, under the State Grain Administration.

 

The Zhengzhou Grain Wholesale Market auctioned 241,571 tonnes of wheat Thursday at an average price of RMB1,501/tonne.

 

"We don't see flour mills rushing to buy now, unlike the last month, as they expect prices to remain stable or even fall slightly," Wei said.

 

China's top economic planning body, the National Development and Reform Commission said Thursday that auctions of grains brought under the minimum purchase price programme or state imports will be held on a regular basis to ensure stable supply and prevent large price fluctuations.

 

"Wheat prices are expected to remain steady by the end of the year," said Hai Yang, a local grain analyst at Zhengzhou Esunny Information Technology Co.

 

Although demand will rise along with the rising production of flour mill ahead of festivals, the market expects sufficient supply, Hai said.

 

China's winter wheat acreage remains stable at 21.53 million hectares, compared with last year's levels, said the official Xinhua News Agency.

 

Total wheat production next year is likely to fall to 99.5 million tonnes versus 102.97 million tonnes this year, according to the CNGOIC.