China's government sold 108,991 tonnes of state wheat reserves whose quality has deteriorated for animal feed production, 36 percent of the volume of 300,990 tonnes offered at Tuesday's auction. The auction marked the first such sale of wheat reserves to feed mills amid tight domestic corn supplies.
Before the sale, analysts said the government might hold about 1.64 million tonnes of feed-grade wheat, which was harvested in 2009, but excessive rains during harvest had hurt the quality. The feed wheat was sold at an average price of 1,791 yuan($272.823) per tonne, according to bidding results posted on an official website (www.grainmarket.com.cn). "Many feed mills are interested in the wheat because prices are quite low, but restrictions have limited mills from bidding too much," said one feed mill official, which joined the bidding.
Beijing, eager to tame food price rises, has limited the numbers of feed mills as well as their bidding volume at weekly state corn auctions. On Tuesday, only 140,775 tonnes of corn were sold out of nearly 1.2 million tonnes on offer, with the average price at 1,818 yuan per tonne for stocks stored in the major consuming areas. The government has sold out nearly 53.50 million tonnes of corn from state reserves since 2008, according to data compiled by an industry website (www.ex-starch.com). Analysts believe that state corn reserves have fallen to under 10 million tonnes or less than the country's one-month consumption.