China wheat prices stable, volatility expected

Wheat prices in China's major producing areas were mostly stable in the week to Monday (Jan 18), as the government's minimum auction prices set a floor and regular sales guaranteed market supply.

Prices in Dezhou in Shandong province were around RMB2,110 (US$309) a tonne, compared with RMB2,110-RMB2,120 (US309-US$310) a week ago.

In Zhengzhou in Henan province, prices were unchanged around RMB2,000 (US$293) a tonne.

Last week, the government sold 1.57 million tonnes of wheat during its weekly auctions, or 39% of the 4 million tonnes it offered to sell. Both volumes were higher than the previous week.

Prices in some areas were slightly lower, as farmers were more willing to sell ahead of the Chinese New Year in mid-February.

However, recent snowfalls have blocked transportation and pushed up agricultural product prices, and prices of electricity and water are expected to rise, so wheat prices are unlikely to fall further, said analysts.

Inflation expectations may cause traders to build stocks, and that could increase price volatility, the China National Grain and Oils Information Center said in a report.