High-quality wheat prices decline amid falling demand from flour milling enterprises
Currently, the purchase price paid by grain brokers for Gaoyou 2018 is 1.30 yuan/jin, and the purchase price for Shiluan 02-1 is 1.36 yuan/jin, both down by 0.05-0.07 yuan/jin compared with the purchase prices when new wheat came onto the market in June and July, said Yang Xinshe, a wheat trader in Baixiang County, Hebei Province. Since new wheat came onto the market this year,
“Currently, the purchase price paid by grain brokers for ‘Gaoyou 2018’ is 1.30 yuan/jin, and the purchase price for ‘Shiluan 02-1’ is 1.36 yuan/jin, both down by 0.05-0.07 yuan/jin compared with the purchase prices when new wheat came onto the market in June and July.” said Yang Xinshe, a wheat trader in Baixiang County, Hebei Province.
Since new wheat came onto the market this year, ordinary wheat prices have been falling all the way, while high-quality wheat prices, due to low output, opened high and kept rising. However, as ordinary wheat prices found it hard to stop falling, corn prices fell below 1 yuan/jin, and market demand showed no improvement, the pattern of high-quality wheat prices remaining high was also broken, and they fell rapidly. The main demand side for high-quality wheat is flour milling enterprises. At present, apart from a few large flour milling enterprises that can barely remain profitable, most flour milling enterprises are operating at a loss; many small and medium-sized flour milling enterprises have an operating rate of only about 30%, and some small and medium-sized flour milling enterprises have gone bankrupt.
According to Han Jingxuan, business director of the Puyang State Grain Reserve Depot in Henan, flour milling enterprises are currently struggling to survive. On the one hand, unsold flour and bran and falling prices have left enterprises unable to make ends meet, and many flour milling enterprises have reduced their purchases and stockpiles of high-quality wheat; on the other hand, tightening loans from financial institutions have worsened the funding strain on flour milling enterprises and have already led to broken funding chains at some enterprises producing specialty flour. Yang Xinshe said that this year, the result of traders and flour milling enterprises purchasing and stockpiling high-quality wheat was “big players lose big, small players lose small, and those who do not play do not lose.”
It is understood that after newly produced high-quality wheat came onto the market this year, some traders sold high-quality wheat while purchasing it, keeping no inventory during their high-quality wheat purchase and sales activities, and ultimately avoided the risk of falling high-quality wheat prices. But after some large traders sold high-quality wheat to flour milling enterprises, they encountered the new problem of being unable to collect payment.
Han Jingxuan believes that the downward trend in high-quality wheat prices will continue. At present, many agricultural product prices are still running in a downward channel. As autumn crops are harvested and come onto the market, the probability is high that prices of agricultural products such as corn and ordinary wheat will fall again, which will put new pressure on high-quality wheat prices. In addition, once market rumors that the purchase prices of newly produced corn this year and newly produced wheat next year will be lowered are confirmed later, that will be another major bearish factor for wheat and corn prices.
However, some market participants believe that, based on an analysis of domestic high-quality wheat output, inventory, demand and the patterns of market changes, the supply of domestically produced high-quality wheat is still not very ample and inventories are also on the low side, and high-quality wheat is about to enter its traditional peak demand season. By then, imported high-quality wheat that arrived at ports in concentrated volumes earlier will basically have been used up, and high-quality wheat prices may stop falling and stabilize.
Since new wheat came onto the market this year, ordinary wheat prices have been falling all the way, while high-quality wheat prices, due to low output, opened high and kept rising. However, as ordinary wheat prices found it hard to stop falling, corn prices fell below 1 yuan/jin, and market demand showed no improvement, the pattern of high-quality wheat prices remaining high was also broken, and they fell rapidly. The main demand side for high-quality wheat is flour milling enterprises. At present, apart from a few large flour milling enterprises that can barely remain profitable, most flour milling enterprises are operating at a loss; many small and medium-sized flour milling enterprises have an operating rate of only about 30%, and some small and medium-sized flour milling enterprises have gone bankrupt.
According to Han Jingxuan, business director of the Puyang State Grain Reserve Depot in Henan, flour milling enterprises are currently struggling to survive. On the one hand, unsold flour and bran and falling prices have left enterprises unable to make ends meet, and many flour milling enterprises have reduced their purchases and stockpiles of high-quality wheat; on the other hand, tightening loans from financial institutions have worsened the funding strain on flour milling enterprises and have already led to broken funding chains at some enterprises producing specialty flour. Yang Xinshe said that this year, the result of traders and flour milling enterprises purchasing and stockpiling high-quality wheat was “big players lose big, small players lose small, and those who do not play do not lose.”
It is understood that after newly produced high-quality wheat came onto the market this year, some traders sold high-quality wheat while purchasing it, keeping no inventory during their high-quality wheat purchase and sales activities, and ultimately avoided the risk of falling high-quality wheat prices. But after some large traders sold high-quality wheat to flour milling enterprises, they encountered the new problem of being unable to collect payment.
Han Jingxuan believes that the downward trend in high-quality wheat prices will continue. At present, many agricultural product prices are still running in a downward channel. As autumn crops are harvested and come onto the market, the probability is high that prices of agricultural products such as corn and ordinary wheat will fall again, which will put new pressure on high-quality wheat prices. In addition, once market rumors that the purchase prices of newly produced corn this year and newly produced wheat next year will be lowered are confirmed later, that will be another major bearish factor for wheat and corn prices.
However, some market participants believe that, based on an analysis of domestic high-quality wheat output, inventory, demand and the patterns of market changes, the supply of domestically produced high-quality wheat is still not very ample and inventories are also on the low side, and high-quality wheat is about to enter its traditional peak demand season. By then, imported high-quality wheat that arrived at ports in concentrated volumes earlier will basically have been used up, and high-quality wheat prices may stop falling and stabilize.