November 25, 2008

China wheat prices up, supplies down


Wheat prices in China's major producing regions moved slightly higher in the week to Monday (November 24), as government auctions reined in market supplies and more flour factories restarted operations.


Wheat prices in Laizhou in Shandong, a major producing province, were RMB1,740 a tonne, up from 1,700-RMB1,720/tonne a week ago.


In Hengshui in Hebei province, prices were up about RMB10 at RMB1,750-1,760/tonne.


Prices were also up about RMB10 in Buyang in Anhui province at RMB1,710-1,720/tonne.


"More flour factories are opening up for business, which helps consumption, and the government auction volumes have not increased," said Hai Yang, an analyst at Zhengzhou Esunny Information & Technology Co.


Wheat prices are expected to see more upward pressure as flour factories open into the holiday season, Yang said.


Earlier this month, the government sharply slashed export tariffs to boost exports, effective December 1, but analysts said the falling global wheat prices and domestic quotas would still limit export growth.


Wheat prices made small gains at government auctions in the week to Monday.


Last week, the government sold 251,300 tonnes of wheat it bought under a minimum purchase price program, or 68 percent of the 367,400 tonnes it planned to sell last week.


The average auction price in Henan province was RMB1,695/tonne, flat from the previous week.


In Anhui province, the average auction price was RMB1,671/tonne, up about RMB10, Yang said.


Since late May, the government has purchased about 45 million tonnes of wheat from the market for state reserves.


The reserves are released regularly to meet market demand and minimize the risk of sharp fluctuations in prices.

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