November 15, 2005

 

China wheat prices steady as market awaits year-end-tender

 

 

Wheat prices in major producing regions in China stayed mostly steady in the week to Monday after a slight fall a week earlier, caused by two wheat auctions.

 

Prices for average quality wheat were quoted around RMB1,420-1,470/tonne Monday in Shandong province, steady from RMB1,420-1,460/tonne a week ago, according to a Jinan-based grain trader.

 

"A mild fall is likely," said the trader. "Buying from flour mills is normal but government warehouses may want to sell more of their old wheat stocks that need to be replaced by new crops."

 

Wheat prices in Hebei, a province that circumvents Chinese capital Beijing, a consumption city, ranged from RMB1,440-1,500/tonne, unchanged from a week ago.

 

The provincial government is expected to hold a wheat tender of almost 400,000 tonnes before the end of the year, according to a wheat analyst.

 

"This will likely support market prices," he said, without elaborating on the possible tender.

 

In Henan, China's largest wheat-producing province, average quality wheat was quoted around RMB1,400-1,440/tonne, basically steady from a week ago.

 

Local traders said they don't expect any upside potential in wheat prices in the near term because demand remains the same, while actual market supply is expected to rise following an auction earlier this month.

 

On Nov 5, Henan province sold around 430,000 tonnes out of more than 900,000 tonnes of local wheat reserves at an average price of around RMB1,342/tonne through the Henan Grains Trading and Logistics Market.

 

China's wheat demand, estimated at more than 100 million tonnes a year, may have been overstated because supply seems to be ample despite years of insufficient output, some analysts said.

 

"Imported wheat has been stored as reserves, instead of being sold to the domestic market directly, and the government has been selling local wheat varieties that are years old," an analyst said.

 

"At least, this could have illustrated management inefficiency in China's wheat market," he said.