Investors Are Urged to Deliberate on Impact of Recent Heavy Rains on China’s Main Wheat Region

Source:  Yicai Global

Investors need to consider carefully the possible impact of recent heavy rainfall on the yield and quality of wheat in the south of Henan province, China’s main wheat producing region, market insiders told Yicai Global.

About a quarter of China’s wheat crop comes from Henan. The province’s southern area is its major production hub, and some areas have experienced long hours of intense rainfall.

The wheat in southern Henan is ripening, while that in the northern part is in the late stage of grain filling, Henan Daily reported, citing Guo Tiancai, a professor at Henan Agricultural University. The rains will impact seed and grain quality as well as the wheat’s commercial value, Guo added.

The wet weather will affect the yield and quality of newly-harvested wheat, Zheng Wenhui, a grain economy researcher at Guangdong South China Grain Trading Center, said to Yicai Global. Caution is advised as speculators hype up the weather factor, though that may result in modest increases in the price of high-quality wheat before the situation becomes clearer, she added.

Prefecture-level cities in southern Henan, including Zhumadian, Nanyang, and Zhoukou, were seriously hit by the rains, according to Zhang Zhixian, deputy director of China Grain Yida Research Institute. The unharvested crops in some fields have sprouted, he noted, adding that the overall impact on the quality of local wheat needs further observation.

Wheat that has sprouted leads to lower yields, quality, and commercial value, and many other issues.

The heavy rainfall has led to a large amount of sprouted wheat in southern Henan, and the quality of some unharvested new wheat will also be adversely affected, Zheng pointed out. However, before the heavy rain, a large part of the region’s wheat had been taken in and was not seriously affected, she noted, adding that the extent of the impact still needs to be verified by more data.

Because of falling global wheat prices over the past six months, it is a foregone conclusion that starting prices for the new crop will be lower, Zheng said. The initial price for third-grade wheat should be about CNY2.6 (36 US cents) per kilogram, lower than last year, she added, noting that market insiders disagree on the outlook but agree there will be little room for big gains and falls.

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