December 23, 2008

China wheat prices slightly higher on strong year-end demand

China's wheat prices in major producing areas were higher in the week to Monday (December 22), supported by strong demand ahead of the year-end holidays.

Wheat prices in Dengzhou in Henan province were around RMB1,680 a tonne, up RMB60 from a week ago.

Wheat prices in Zibo in Shandong province were around RMB1,760/tonne, up RMB20 from a week before.

The government increased the wheat sales volume during its weekly auction, and the purchase rate was higher than in the earlier week.

Last week, the government sold 460,000 tonnes of wheat during the auction, or 84 percent of the 550,500 tonnes it planned to sell.

That compared with the 80 percent purchase rate in the week before.

"It shows the market demand is active, while the supply is tightening," said Hu Kai, an analyst at Dalu Futures Co.

Traders were not buying actively in earlier weeks, as they remained cautious amid the financial crisis, and they need to refill their stocks during the year-end holidays.

Wheat prices will likely remain strong in the coming weeks if the government doesn't increase its auction volumes substantially, said Hai Yang, an analyst at Zhengzhou Esunny Information & Technology Co.

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