BEIJING: China’s wheat prices on Thursday topped 3,000 yuan per tonne for the primary time this week because the battle between two main wheat exporters Russia and Ukraine has fuelled panic in a market already frightened over a home supply crunch, merchants and analysts mentioned.
Wheat prices throughout a number of key demand hubs in China, the world’s high shopper and producer of the grain, have jumped by greater than 100 yuan previously week, with bids as excessive as 3,250 yuan per tonne within the south, knowledge from Shanghai Intelligence Consultancy confirmed.
“Domestic wheat is rising like loopy,” mentioned a supervisor with a serious dealer.
“(The Ukraine crisis) has some play in it, however the elementary purpose nonetheless stays within the (home) supply-demand imbalance,” mentioned the supervisor, who declined to be named as he was not authorised to speak to media.
Wheat shares held by Chinese merchants and farmers had been drawn down sharply in 2021 after native corn prices jumped to a uncommon premium over wheat to set off tens of millions of tonnes of wheat use by animal feed producers.
Wheat prices regained a premium over corn late final 12 months, and gathered additional upside momentum in current days after Russia’s shock invasion of Ukraine and a subsequent volley of worldwide sanctions on Moscow rattled international crop markets.
International benchmark Chicago wheat prices hit a 14-year excessive on Thursday, on considerations over extended supply disruptions following Russia’s invasion of its rival grain exporter Ukraine.
UPSIDE ROOM
Traders say the market’s momentum stays towards the upside no less than within the close to time period.
“Domestic wheat prices are anticipated to rise additional, until the federal government releases vital quantities of grain from the (state) reserves,” mentioned Lv Fengyang, analyst with the agriculture part of Mysteel, a China based mostly commodity consultancy.
“Moreover, there may be the uncertainty within the international market with the battle. The home market was additionally frightened in regards to the high quality and output of the brand new wheat crop,” Lv added, in reference to heavy rains that delayed winter wheat planting final fall.
To cool prices, Beijing has been conducting common auctions from its state stockpiles for the previous 12 months or so, though the volumes provided have been diminished from round 4 million tonnes at some auctions in 2021 to round 500,000 tonnes not too long ago.
The common worth of wheat offered in auctions this 12 months is up round 15% than final 12 months.
GOVERNMENT WATCH
While Beijing has aggressively cracked down on commodity inflation over the previous 12 months, the upper wheat prices should not totally unwelcome as they’re anticipated to spice up earnings for farmers and spur elevated home manufacturing.
However, with demand for milling flour and wheat feeding staying flat, the shopping for spree in current days dangers irking authorities if prices get too frothy, sources mentioned. – Reuters
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