China halts auctions of wheat reserves before new harvest

CHINA has stopped its weekly wheat auctions from state reserves, earlier than last year when stocks were higher, traders and analysts said.

China suspended sales of wheat from its reserves last week, and did not release any auction results on Monday (Apr 25), a move that further bolstered prices of the grain which have hit record highs due to tight supplies, exacerbated by the war in key producer Ukraine.

"A lot of the wheat was consumed last year. You can't keep using that much every year. Inventories were not plentiful either," said a source with a state institution.

"Demand is not as strong either. Only milling plants were allowed to participate in the auctions this year," said the source, who declined to be named as he was not authorised to talk to the media.

Beijing had been releasing only around 500,000 tonnes of wheat from the reserves in weekly auctions recently, compared with 4 million tonnes at some auctions in 2021.

Auctions last year did not stop until May 10, and more than 27 million tonnes of wheat was sold from the reserves from the beginning of 2021 until the sale was halted before the new harvest.

Beijing late last year banned feed producers and livestock farmers from buying wheat from the state reserves at auctions, in a move to cool down prices of the food grain.

Chinese feed producers snapped up wheat from the state stockpiles during auctions in the last crop year to replace corn, after corn prices soared to record levels.

Wheat feeding fell sharply later, however, as prices of the grain rallied, losing its advantage over corn.

Wheat prices in Shandong province, a main producer, hit record high levels at 3,380 yuan (US$707.6) per tonne last week, before edging down slightly.

The market is closely watching China's new wheat crop, which initially endured the worst crop conditions in history but conditions have since improved more than expected. REUTERS