December 3, 2013
China wheat prices forecast to remain strong until early 2014
Fuelled by high demand for the grain ahead of traditional holidays, China''s wheat prices gained ground this week to hover around record levels and are likely to remain elevated until at least early next year.
Expensive domestic wheat prices would lead mills and trading companies to import the grain from as early as next month when they are allocated import quotas, they said.
Zhengzhou front-month January 2014 contract touched record high of RMB2,874 (US$472) per tonne on November 27 before easing to RMB2,866 (US$470) on Friday (Nov 29).
Prices firmed even after Beijing stepped up state sales of high-quality wheat, and they may remain elevated even after the Lunar New Year, or Spring Festival, at the end of January, according to some analysts.
The government offered nearly 650,000 tonnes this week for sale in Henan province, the country''s top wheat area, of which 94% was sold. The volumes offered have increased from 100,000 tonnes in September.
The wheatoffered in Henan was from the 2012 harvest, whose quality was better than wheat stored in 2010 and 2009. Besides sales in Henan, the government has released reserves from the 2013 harvest in other provinces, including Jiangsu and Anhui since last week.
"Because of the weather damage, local authorities have failed to stockpile a huge volume of wheat from the 2013 harvest and there won''t be much wheat from reserves to be traded after the Festival," said an industry source, adding the government stockpiled about eight million tonnes from the 2013 harvest. China does not publish its state reserve figures. But analysts said commercial firms are still holding about 40 million tonnes of stocks.
China''s milling wheat supply has stayed tight after the domestic wheat crop suffered severely from bad weather in major growing areas in the middle of the year.
Beijing has since April increased imports to refill its depleted reserves. Some three million tonnes would arrive before end of December, which will be stored at government silos, analysts said.
China''s wheat imports in October were at 1.3 million tonnes, the highest monthly imports since 1996 largely because of state purchases.