July 3, 2006

China's wheat replacing corn in feed making

China's wheat prices were little changed last week as state warehouses continued to buy from farmers at government-set minimum purchase prices.

Meanwhile, as corn prices have remained high since early this year, some feed producers have begun to use wheat as a replacement of corn in feed production, traders said.

"This might continue to be the situation this year, given the supply and demand situation of both two crops," said a trader based in Jilin province.

Wheat prices in major producing regions were quoted around RMB1,380/tonne-RMB1,440/tonne (US$172.5-US$179.9) Monday (Jul 3).

Since the policy began to be enforced Jun 1, buying from state warehouses at government-set prices accounted for 80 percent of farmers' sales, traders said.

The central government has designated state-owned warehouses in six major wheat-growing provinces to buy white wheat at RMB1,440/tonne (US$179.9) and red wheat at RMB1,380/tonne (US$172.5) until Sep 30, in the hopes of protecting farmers' incomes.

Wheat prices before June had been slightly below the government-set prices.

Analysts at China National Grain & Oils Information Centre said earlier that wheat prices would probably remain largely stable until the end of September.