June 14, 2011

Wheat prices in China's major producing areas were largely stable in the two weeks to Monday (Jun 13), as many traders and flour mills still stayed on the sidelines to wait for fresh price cues amid harvesting.

Wheat prices in Jinan, Shandong province, were around RMB2,110 (US$326)/tonne, unchanged from two weeks earlier, while prices in Zhengzhou, Henan, were stable at RMB2,060 (US$318)/tonne. Chinese markets were closed last Monday for a holiday.

The government is likely to increase the price at which it buys wheat for state reserves this year, as market prices have risen beyond the RMB1,860-1,900 (US$287-293)/tonne price range it set in October for this year's state wheat purchase programme.

The government buys wheat each year to replenish its stockpiles and encourage farmers to plant the grain.

Farmers are reluctant to sell as they expect prices to rise amid high inflation, although some traders and flour mills are buying newly harvested wheat around RMB1,900-2,000 (US$293-309)/tonne, analyst said.

Wheat prices will likely be stable or rise only slightly in the next few months, as supply is sufficient despite strong demand, she said.

Sales volume of reserve wheat Wednesday fell for a fifth consecutive week as flour mills and traders stayed on the sidelines or shifted interest to new crop wheat.

A total of 54,000 tonnes were sold in Anhui and Henan provinces, down from about 200,000 tonnes in the last such sale on June 1, according to the local wholesale markets.

Wheat harvesting in China, the world's largest producer of the grain, was about 60% complete as of Sunday, the Ministry of Agriculture said Monday.