June 21, 2011


Soft trading holds China's wheat market stable


Wheat prices in China's major producing areas were largely stable in the week to Monday (Jun 20) amid thin trade, with many farmers reluctant to sell fresh arrivals as they expect prices to rise.


Harvesting is mostly over in China, and the new crop has begun arriving in the market. However, purchasing activity has not picked up as traders and flour mills are still seeking loans for restocking.


Old-crop prices in Jinan in Shandong province were around RMB2,110 (US$326)/tonne, unchanged from a week earlier, while prices in Anyang in Henan were stable at RMB2,060 (US$318)/tonne.


This year the government is unlikely to buy wheat from farmers for reserves as market prices for the new crop are higher than RMB1,860-RMB1,900 (US$287-293)/tonne, the price range it set in October for this year's wheat purchase programme.


New-crop prices are RMB1,940-RMB2,060 (US$300-318)/tonne in major producing areas, a bit lower than old-crop wheat due to higher moisture content and impurities.


The new-crop prices will rise RMB40-60 (US$6-9)/tonne on the back of high inflation expectations and as more buyers enter the fray, analysts said.


Higher buying by feed mills will also support the prices, said Chinese Grain Network, a consultancy owned by China Grain Reserves Corp.


The mills are substituting wheat for corn in animal feed as corn prices are much higher.

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