December 17, 2003

China Wheat Markets Fall On Auctions And Import Talks

Chinese wheat markets were mostly lower in the past few days, due to increased supplies from government-held auctions, traders in China said Tuesday.

Talks of large wheat imports during early 2004 also pressured the markets.
 

Prices of normal grade wheat in northern major-producing regions fell hard in the week ending on Tuesday. Wheat gave back nearly all the gains made since late November after China's government stepped up the release of wheat stocks from state reserves.
 

Ex-warehouse prices of normal grade wheat in Hebei and Shangdong provinces, northern China, were quoted between 1,440-1,520 yuan ($1=CNY8.28) a metric ton, CNY40-80 lower than prices one week ago, but almost unchanged from late November levels.

Wheat markets in Hebei and Shandong were softer in the past few days, due to increased movement of wheat from Henan, the top wheat-producing province in China, traders said.

Last week, Henan province in central China held an auction and sold nearly 200,000 tons of old wheat from state reserves to selected feedstuff producers.

Henan's government decided to sell nearly 1.00 million tons of wheat from state reserves this month to stabilize markets before the New Year's holiday beginning Jan. 1.

Domestic wheat markets rose sharply since late November, after local governments in northern China took stricter measures to curb truck overloading in highways. That raised transportation cost and limited the movement of wheat.

Henan province will hold an auction to sell about 750,000 tons of wheat from state reserves soon, but the exact date is still not decided, traders said.

"These auctions clearly showed the resolve and capability of local governments to stabilize the grain and oilseed markets," a trader from a local trading house in Henan said Tuesday.

Anticipation of large wheat imports in the coming months also helped to dissipate the lingering concerns about China's dwindling wheat stock.

China has reached deals with Canadian Wheat Board to buy 500,000 tons of Canadian wheat in 2004 during Chinese Premier Wen Jiabao's visit to Canada last week.

In 2004, China is likely to import at least 1.00 million tons of U.S. wheat, industry sources said Tuesday.