December 19, 2005

 

China wheat prices mostly steady; few changes expected
 

 

Wheat prices in major producing regions of China were mostly steady in the week to Monday, extending a pattern that has lasted nearly two months.

 

Traders said they do not expect wheat prices to fluctuate sharply ahead of the Lunar New Year holidays, which begin in late January.

 

In Henan, China's largest wheat-producing province, prices of average quality wheat were quoted about RMB1,400-1,450/tonne Monday, unchanged from a week earlier, said a trader with a Zhengzhou-based flour mill.

 

Wheat prices were quoted about RMB1,400-1,460/tonne in Shandong province, largely steady from a week earlier.

 

Prices for average quality wheat in Hebei province were quoted in the range of RMB1,450-1,500/tonne, largely steady from a week earlier, according to a trader based in Shijiazhuang, the province's capital city.

 

"Wheat prices have been mostly steady since harvesting (that commenced in) summer, with a maximum change of only RMB50-60/tonne," he said.

 

"I don't expect any big change in the coming month," he said, adding that any major price changes would have occurred by now.

 

Chinese flour mills usually build up wheat stocks and speed up milling activity more than one month before the Lunar New Year holidays, which occur in January or February each year.

 

However, the seasonal model has basically disappeared since last year, as local consumers are believed to be changing their consumption patterns along with rising incomes.

 

Consumption of food staples has been steady and even falling, but more people are consuming meat and other high-protein food, as well as fruits and vegetables.

 

Although demand for wheat is dropping, wheat production has been rising since 2004.

 

The country's wheat output is believed to have risen to about 96 million tonnes this year from 91 million tonnes last year. However, output continues to lag demand, estimated to be just over 100 million tonnes.

 

But some local traders said China's wheat demand figures may have been exaggerated in recent years.

 

Wheat prices have been mostly steady and have even fallen since last year, which illustrates ample supplies in the market, some traders argued.

 

China is believed to have sizable wheat stocks but the government does not disclose the volume.

 

The country also imported more than 7 million tonnes of wheat in 2004, but imports have shrunk in 2005 due to a sluggish domestic wheat market.

 

Wheat imports have been mostly put into state warehouses, instead of being sold to the market, indicating there is no need to boost available market supply, some traders said.