August 30, 2011

China's wheat prices remain mostly stable

China's wheat prices in the major producing regions were mostly stable in the week to Monday (Aug 30), but are seen to rise soon, as cooler autumn weather allows flour mills to increase their stocks.

In Anyang, Henan province, China's largest wheat producer, flour mills bought wheat last week at RMB2,040 (US$319.47) a tonne, unchanged from the previous week. In Dezhou, Shandong province, China's second-largest producer, the price of new-crop wheat was flat at RMB2,040-2,060/tonne (US$319.47-$322.61).

Flour mills are operating at only 30-40% of capacity, and wheat stocks are low due to hot weather and weak seasonal demand, Hai Yang, an analyst with Zhengzhou Esunny Information & Technology Co., said.

The operating rate should increase to 70%-80% by October, since wheat and flour store longer in cooler conditions, and flour demand should pick up, she said.

Demand for wheat to produce animal feed and alcohol will increase this year, since corn is at a record premium to wheat, she said.

As of August 15, grain firms in 11 major wheat-producing areas had purchased 44.1 million tonnes of wheat from farmers, compared with 46.3 million tonnes during the same period last year, according the State Administration of Grain.

State-owned companies bought 29 million tonnes, accounting for 66%, compared with 79% last year.

In major provinces, farmer-held wheat stocks totaled about 50-80% of their annual output, traders said.

Farmers are reluctant to sell, since they expect prices to rise in the coming months, they said.

The price of wheat flour - a staple in many parts of China - has risen only 7% so far this year, which is far less than pork at 38%, according to the Ministry of Commerce.