October 7, 2008

China wheat prices up on higher demand, government sale suspension

China's wheat prices in major producing areas were higher in the week to Monday (October 6), as demand picked up even as the government suspended weekly auctions due to the week-long National Day holiday.

Wheat prices in Dezhou in major producing Shandong province were RMB20/tonne higher, at RMB1,740/tonne, compared with a week earlier.

Wheat prices in Handan in Hebei province were around RMB1,760/tonne, up RMB30/tonne from a week ago.

Trading was very light during the holiday. Millers needed to buy more wheat as flour demand picks up with the onset of colder weather - but farmers were busy planting wheat for the new crop year and not selling old wheat stocks.

In any case, there is limited old wheat left in the market and the government has not started to auction the new wheat yet.

Reduced supply and higher demand helped to push prices higher, analysts said.

Wheat prices are likely to rise further once the Chinese government starts auctioning the new wheat, as input costs were higher this year than a year ago, said Hai Yang, an analyst at Zhengzhou Esunny Information & Technology Co.