October 27, 2011

China's feed mills are buying larger quantities of feed-grade wheat at weekly state sales as domestic prices of corn remain high despite increased supplies in the market from the new harvest.

The government sold 103,155 tonnes of wheat on Tuesday (Oct 25), exceeding 100,000 tonnes for the first time since April. Tuesday's sale brought the total of state feed-wheat sales to 1.21 million tonnes since late March, when the government began weekly auctions to selective feed mills.

Tuesday's wheat was sold at RMB1,809-1,710 (US$284-269) per tonne, below corn prices offered at RMB2,370 (US$371)/tonne at Dalian port, the largest corn port in the northeast, although the price has fallen from record RMB2,480 (US$388)/tonne late in September.

The China National Grain and Oils Information Centre (CNGOIC) said about 420,000 tonnes of feed-grade wheat is left in state reserves, meaning that the weekly state sales could end in December. Feed mills may later shift to standard-quality wheat, which may drive up the country's overall wheat prices, said the centre.

Wheat remains more competitive than corn, particularly for mills in the southwest province of Sichuan and southern provinces of Hunan and Jiangxi, which are facing corn supply deficits.

China has already stepped up imports of wheat from the global market to meet its rising demand for animal feed production due to tight corn supplies. The world's second-largest corn consumer has also increased corn imports this year.