October 18, 2011

Wheat prices in China's major producing areas rose slightly in the week to Monday (Oct 17), as wheat sales slowed with farmers reluctant to sell.

In Suzhou city in the central province of Anhui province, wheat prices rose 2% from a week earlier to RMB2,140 (US$336)/tonne. In Wuxi, Jiangsu, prices rose 1% to RMB2,110 (US$331)/tonne.

Farmers are reluctant to sell their inventories as they expect higher prices in the coming months, as supply will become tighter before the harvest due to start in June, traders said.

Farmers are holding on to about 30%-40% of their wheat output, forcing some flour mills to buy wheat from weekly government wheat auctions, they said.

The government sold 308,700 tonnes of wheat, or 10% of the amount it offered, in an auction Wednesday, up from 139,500 tonnes last auction, the National Grain & Oils Trade Centre said.

Wheat prices are expected to be stable in the next few weeks as rising offer prices will curb wheat demand from flour mills, whose profit margins are already thin, analysts said.

Retail flour prices have risen 9% so far this year, according to the Ministry of Commerce.