September 20, 2011

Wheat prices in China's major producing areas rose in the two weeks to Monday (Sep 19) amid strong flour demand in the traditional high-consumption season.

Cooler autumn weather also allowed more flour mills to increase stocks, underpinning prices.

Wheat prices in the major producing and consumption provinces of Henan, Hebei and Shandong rose around RMB15 (US$2), or 0.8%, to RMB2,060-2,140 (US$322-335)/tonne.

Market participants expect the government to raise its minimum purchase price for 2012 wheat by around RMB200 (US$31)/tonne, or 10%, to encourage farmers to produce the grain.

The government usually announces the wheat purchase price for the next year in October.

The state-set 2011 minimum wheat price prices were RMB1,860-1,900 (US$291-297)/tonne, up 6%-8% from a year ago.

Market prices will likely rise gradually in the next few months on the back of high demand and restocking by flour mills, analysts said.

China's Minister of Agriculture Han Changfu said Friday that the government plans to stabilise 2012 winter wheat acreage at 22.6 million hectares, compared with actual acreage of 22.7 million hectares this year.

The government also plans to raise the per-hectare winter wheat output by 0.9% to 4.95 tonnes. Winter wheat accounts for more than 90% of China's wheat production.