September 12, 2006

 

China's wheat prices flat; trading volume up in the north

 

 

China's wheat prices last week were mostly unchanged, as trading volume continued to pick up in northern provinces, analysts said Monday (Sep 11).

 

Wheat prices in major producing regions were quoted around RMB1,380-RMB1,440 a tonne.

 

In the hope of protecting farmers' incomes, China's central government has designated state-owned warehouses in six major wheat growing provinces to buy white wheat at RMB1,440/tonne and red wheat at RMB1,380/tonne until Sep 30.

 

Since the policy was implemented Jun 1, buying by state warehouses at the government-set prices accounted for over 80 percent of farmers' total sales, analysts said.

 

Prior to that, wheat prices were slightly lower than the government-set prices.

 

"Trading became increasingly active in the north, but was slowing down in central and southern provinces last week," said Zhang Liwei, an analyst at China National Grain & Oils Information Centre.

 

Hai Yang, an analyst at Zhengzhou Esunny Information Technology Co concurred, adding "farmers in Hebei and Shandong provinces rushed to sell to state warehouses as the minimum purchase price policy is drawing to an end".

 

"Farmers in Hebei and Shandong have sold around 9 million tonnes of wheat, accounting for over 30 percent of their total harvest," Hai said.

 

Chinese farmers usually stockpile up to 50 percent of their crop for their own consumption or for sale in the later part of the year.

 

Demand is looking up as the week-long National Day holidays and the Mid-Autumn festival, one of the most important traditional Chinese festivals, are less than one month away, analyst said.

 

"Flour factories are buying more wheat now, in order to step up production to meet growing demand," Hai added.

 

Nevertheless, "wheat prices are not expected to rise substantially, due to large stocks," Zhang said.