May 18, 2011

China's wheat prices stable ahead of new crop harvest

Wheat prices in China's major producing areas were mostly stable in the week to Monday (May 16), as ample sales from government stockpile buffered suppliers ahead of a new crop due to be harvested this month.

Wheat prices in Zhengzhou, Henan province, were around RMB2,060-2,070 (US$316-318)/tonne, flat from a week ago, according to data from Zhengzhou Esunny Information & Technology Co.

Prices in Jinan, Shandong province, were around RMB2,110 (US$324)/tonne, also flat from last week.

"Demand at government auctions has been somewhat lower as the market is awaiting the arrival of the new crop," she said.

China's mid-year wheat harvest, which accounts for a third of the total wheat harvest, kicks off towards the end of May and takes about two weeks to complete.

Market expectations are that this year's summer harvest will be equal to or slightly larger than last year's, which totalled 123.1 million tonnes.

Favourable weather reports this month have eased concerns in producing areas in central China over the harvest after dry weather late in the season.

Meanwhile, China sold 69,641 tonnes of feed wheat from state reserves on Tuesday (May 17), bringing total sales to 620,307 tonnes since the government initiated the sale late in March.

The weekly volume has declined since May as feed mills expect domestic feed wheat prices to fall ahead of a looming harvest later this month. Sales of feed have helped ease tight domestic supplies of corn, where physical prices have already hit a record high.

China restricted the bidding only to some big feed mills and also capped their purchase volumes. The sales do not reflect the true picture of demand from feed mills.