November 28, 2006

 

China's wheat prices down on auctions; supplies to increase

 

 

China's wheat prices fell a tad in major producing regions last week, pressured by auctions over weekend, analysts said Monday (Nov 27).

 

Average quality wheat in major producing regions were quoted around RMB1,480-1,600 a tonne, down RMB20-30/tonne from a week earlier.

 

"Wheat prices dropped late last week in response to auctions scheduled for last Saturday," said Hai Yang, a local grain analyst at Zhengzhou Esunny Information Technology Co.

 

Henan, Hebei and Anhui provinces, major wheat-producing regions in China, sold a total of 1.09 million tonnes of wheat in auctions Saturday.

 

China's production of winter wheat was around 99.3 million tonnes this year, up 9 percent on year, according to the China National Grains and Oils Information Centre, which is under the State Grain Centre.

 

Wheat purchases by state-owned warehouses were over 40 million tonnes during this period, effectively making the government a monopoly supplier in the market.

 

The government holds auctions to releases its stocks to the market, with the first one held Nov 3.

 

With more auctions expected over the next few months, the current supply shortage will substantially ease, local traders said.

 

"The government will sell around 20-30 million tonnes of summer-harvested wheat through auctions over the next several months," Hai said.

 

"The situation will be further improved by farmers and grain traders who were seen rushing to sell wheat lately, in anticipation of more losses in wheat prices in the near future," she added.

 

However, a slump in wheat prices is unlikely, with the government expected to stabilise prices. "The government, as a monopoly supplier, will keep wheat prices in a range of around RMB1,440-1,520/tonne," Hai said.

 

Henan, Anhui and Hebei plan to auction a total of 1.1 million tonnes of wheat Thursday, auctioneers entrusted by China's grain authorities said Monday.