China increases purchases of wheat for the state reserve

Heavy rains are forcing farmers to sell wheat locally. Domestic prices are near three-year lows. Imports have jumped, but demand is likely to fall.

China is boosting state purchases of wheat to support local prices after heavy rains forced some farmers to send their crops to a market already overflowing with grain.

Sinograin and its affiliates will buy more new crop wheat for its reserves, the company said in a message on WeChat on Wednesday. The state-owned stockpiling company made a similar promise at the start of the harvest in June, but prices continue to hover near three-year lows due to a combination of ample supply and low demand.

A recent downpour in northern China, a major wheat-producing center, has exacerbated oversupply as farmers and traders rush to sell to avoid risking moisture damaging their crop in storage. At the same time, the weak economy is curbing flour consumption for products such as noodles and bread.

“This year has seen record production, weak demand and record imports,” said Darin Friedrichs, co-founder of Sitonia Consulting Co. “Purchases from government reserves have helped stabilize prices after harvest, but prices continue to be low.”

China reported another record wheat harvest of 138 million tons, up 2.7% from last year. Meanwhile, imports jumped 16% to 9.3 million tons in the first half of the year, although weak local prices are likely to curb China’s appetite for foreign supplies in the future.

Tags: grain, wheat, China