China's wheat sale from state reserves fall after government intervention

BEIJING: China sold 515,209 tonnes of wheat, or only 12.81% of the total on offer, at an auction of state reserves last week, the National Grain Trade Center said in a statement on Monday.

The volume sold, at an average price of 2,349 yuan ($358.19) per tonne, declined from more than 1.5 million tonnes sold in the prior week, following government intervention.

Chinese traders and feed makers have been scooping up wheat from reserves to substitute for more expensive corn in feed use, amid soaring prices of the latter grain.

The buying spree pushed up prices of wheat, a staple food grain in the world's most populous nation.

The government, in an effort to cool down the market, had permitted the participation of only flour processors, feed and livestock firms in the auction last Wednesday, essentially banning traders from the sale.

The buyers were required to undertake that the wheat purchased would be for self-use only, and not for trading, according to the National Grain Trade Center's notice on its website in early April.

"The restriction on traders' participation in the auction has cooled down the sale, but it does not mean that the feed demand (for wheat) is weak," said Meng Jinhui, senior analyst with Shengda Futures.

The fall in wheat sale also comes after China's corn prices declined from their record high levels hit early in the year, while a recent round of African swine fever outbreaks slashed pig herd in northern China, and curbed demand for feed.

"Demand for wheat from the feed sector is still quite strong," said a purchasing manager for a flour processor.

But the government intervention has pushed down sale during last week's auction, while African swine fever outbreaks dented the demand a little, he added.

"Many feed producers have built their stocks till May...We will need watch what happens in May," said the manager, who declined to be named as he was not authorized to talk to the media.

The table below shows the volume of wheat sold at weekly auctions from China's state reserves in 2021.