January 6, 2009

Wheat prices in China's major producing areas were mostly stable in the week to Monday (January 5), supported by purchases ahead of Chinese New Year.

White wheat prices in Xuzhou in Jiangsu province were around RMB1,720 a tonne, unchanged from a week ago.

White wheat prices in Hebi in Henan province were around RMB1,660/tonne, the same as the week before.

Red wheat wholesale prices in Huazhong in Hubei province were around RMB1,600/tonne, also stable.

Wheat consumption is usually strong before the Chinese New Year holiday, which starts Jan. 25 and lasts for one week, and wheat flour processing plants are buying to prepare for holiday consumption, said Hai Yang, an analyst at Zhengzhou Esunny Information & Technology Co.

Although major commodity prices in China and globally have been weak amid global financial woes, putting pressure on wheat prices, analysts expect wheat prices to be largely stable as the government holds most of the wheat stocks.

"Wheat prices are likely to consolidate around the government's weekly auction prices in the near term," said Dragon Grain Network in a note.

China's Ministry of Agriculture said last week it has taken steps to contain the impact of an ongoing drought in major wheat producing areas, which will threaten the crop during winter.

The drought in eastern China started in late October and will have a negative impact on wheat in winter, said the ministry.

But analysts said the drought so far won't have much of an impact on next year's output, as it isn't the crucial growing period now.