January 16, 2007

China's wheat prices stay flat amid government sales

China's wheat prices remained stable in the week to Monday (Jan 15), while government sales had little impact on the spot market, analysts said.

Prices of average-quality wheat in Henan province were quoted around RMB1,560 a   tonne and at RMB1,580-1,600/tonne in Hebei province, unchanged from the previous week.

"Prices will likely remain stable ahead of the Spring Festival," said Hai Yang, a wheat analyst at Zhengzhou Esunny Information Technology Co.

Hai said as regular government sales will ensure supply, rising demand for flour before the festival won't result in higher prices.

Demand for major agricultural commodities usually peaks before China's Lunar New Year, or Spring Festival, which falls on Feb 18 this year.

China sold 612,548 tonnes of wheat last Wednesday, in the latest of a series of auctions held by the government to sell wheat harvested last year.

"It's likely that people will buy less in the following government auctions, as farmers themselves will try to sell more, in the hope of turning their stocks into cash," said an analyst at a government body.

"But that won't affect prices much either, because they will buy less from the auctions, leaving the demand and supply side balanced," said the analyst.