More auctions of wheat held to ease demand

(China Daily)
Updated: 2006-12-08 06:44

The State Grain Administration held more auctions of wheat yesterday totalling 800,000 tons to ease market demand.

It follows three auctions held last month to ease the shortage of wheat and stabilize market prices.

However, analysts said yesterday the auctions would not help ease the surging prices of wheat in the long run.

Held in Hefei, Zhengzhou and Shijiazhuang, the auctions set the minimum bid price at 1,440 yuan (US$180) per ton of red wheat and 1,500 yuan (US$187) per ton of white wheat.

The Zhengzhou Grain Bureau reported, before the close of the auction, that 80 per cent of the 300,000 tons of wheat on offer had been sold.

"This fourth supply batch will surely help control wheat prices and consolidate the achievements of the previous auctions," Zhang Liwei, deputy dean of the analysis bureau with China Grain and Oil Information Centre, told the Beijing Times.

Zhang said the State Grain Administration would regularly auction its grain reserve to help control prices.

Food and oil prices have been steadily rising across the country since August. The price of wheat had risen by about 10 per cent to 1,700 yuan (US$212) per ton last month.

The price of wheat so far this month has come down to about 1,600 yuan (US$200) per ton after a total of 250,000 tons was sold to bidders in Hefei and Zhengzhou during the last three auctions.

"The price hikes are a result of the central government's imposition of a minimum purchase price for grain to protect farmers. Prices will stabilize as soon as the State offers enough wheat to the market," Dong Jinwen, an official with Shandong Provincial Pricing Bureau said.

But analysts predict wheat prices would continue rising in the long run due to strong demand in the domestic and foreign markets.

The minimum purchase price after three consecutive years of bumper harvests had kept wheat prices at a higher level and tightened market supply, analysts said.

Also, the shortage in international markets, caused by droughts in the United States and Australia, had also contributed to the price hikes, analysts said.

The central government has centralised grain purchases for six main grain production bases and bought more than 41 million tons of wheat for State-run reserves, accounting for almost 40 per cent of the country's estimated 103 million tons annual wheat income, according to statistics from China Grain and Oil Information Centre.

According to the website www.wheatchina.com, the world's wheat reserve has hit its lowest in 26 years with only 11.8 million tons in storage. China's wheat exports to foreign countries is therefore expected to grow substantially, the website said.

(China Daily 12/08/2006 page2)



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