March 13, 2007

China wheat prices mostly steady

Wheat prices in China remained largely stable in the week to Monday (Mar 12), with only those in Shandong province rising slightly on expected lower output there this year.

"An earlier drought and sudden snowfall in early March led to market speculation of lower output in Shandong this year," said Hai Yang, a wheat analyst at Zhengzhou Esunny Information Technology Co.

In Shandong, a major wheat-growing province, prices of average-quality wheat rose by about RMB20 from a week ago to RMB1,560-1,600 a tonne.

Market participants said flour mills in the province have been speeding up buying amid concern that prices will rise further.

Prices of average-quality wheat in Henan province were quoted around RMB1,500/tonne and those in Hebei province at RMB1,560-1,600/tonne, both little changed from the previous week.

"The concern about less output may potentially drive prices up, but I don't think we will see prices rise quickly in the short term, given the government's weekly auction, which helps to ensure supply," Hai said.

Meanwhile, flour mills' buying has become more active with their stockpiles built up before the Lunar New Year holiday depleted.

China's weekly auction of wheat bought under the minimum purchase price programme since late last year has been helping to stabilise wheat prices.

Last Thursday, the government sold 500,000 tonnes of wheat in six provinces during its weekly auction, or 83 percent of the 604,600 tonnes it had planned to sell.