China plans to release local 2015 wheat to stabilize domestic prices

01.11.2016

China plans to auction off 150,000 mt local wheat from its 2015 state reserves on November 1 to help stabilize domestic prices, the National Grain Trade Center said in a statement Monday.

Hebei will release 50,000 mt while Shandong will release 100,000 mt in the upcoming online auction, the statement added.

Last Tuesday, 98,313 out of a total of 2,405,475 mt of Chinese white and mixed grade wheat from the 2009 to 2014 seasons stored in state-owned warehouses in Jiangsu, Anhui, Shandong, Henan, Hubei and Xinjian were sold through auction.

NGTC said that the prevailing wheat prices in northern China prompted the release.

Production losses and wheat quality downgrades owing to flooding during the harvest in June-July have resulted in lower volumes of Chinese “normal” or grade 3 wheat in the open market.

Higher procurement by the state in northern China this year, said to be the highest in seven years in Shandong province at more than 31 million mt as of June 30, compared with 11 million last year, have further tightened supply in the open market.

This led to a hike in the 2016 normal wheat price, around Yuan 2,600 (382.82)/mt DEL, nearly Yuan 250/mt higher from last year, a Chinese miller said.

The country has implemented a minimum domestic wheat price since 2006. On October 21, it maintained the floor price at Yuan 2,360/mt for the fourth year despite falling international prices, to safeguard farmers’ interests and ensure food security.

Domestic wheat has been Yuan 900/mt costlier than imported wheat for the past year, which is tough for private millers as they are unable to import on their own.

The Chinese government imposed a import quota system, allowing only 10% of allocated import quota to private buyers, with the rest allocated to state buyers such as Sino Grain and Cofco.

Wheat imports quota for 2017 is set at around 9.64 million mt, unchanged from the previous year, but the world’s largest producer typically imports only about 3 million mt/year.

State procurement from major producing provinces as of September 30, was 75.82 million mt over June-July, up 9.51 million mt from last year, the NGTC said on October 17.


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