January 13, 2009

Wheat prices in China's major producing areas were stable in the week to Monday (January 12), supported by an ongoing drought.

 

Wheat prices in Dezhou in Shandong province were around RMB1,790 a tonne, stable from a week ago.

 

Wheat prices in Jize county in Hebei province were around RMB1,780/tonne, unchanged from the week before.

 

There has been very little rain in major wheat producing provinces such as Henan lately.

 

The government has taken steps to contain the impact of the drought, which will threaten the crop during winter.

 

"The drought may result in a 5 percent cut in wheat production from last year if there is no rain for another week," said Dong Jianye, an analyst at Tianqi Futures.

 

China's wheat output in 2008 is estimated at 112.5 million tonnes, up 2.9 percent from a year earlier, according to the China National Grain and Oils Information Centre.

 

Last week, the government greatly increased its weekly wheat auction volume, selling 802,579 tonnes or 53 percent of the 1.51 million tonnes it planned to sell.

 

The large volume is aimed at meeting strong demand ahead of the week-long Chinese New Year holiday, which will fall on January 25 this year.

 

However, as most processing plants have completed their purchases for the holiday, only slightly over half of the planned sales were made during last week's auctions.

 

Wheat trading is likely to be light in the coming two weeks ahead of the holiday, and prices are likely to remain stable, said Ma Wenfeng, an analyst at Beijing Orient Agribusiness Consultant Ltd.