The supply-demand pattern in the wheat circulation market will gradually ease
At present, the domestic wheat market as a whole shows a phased “supply down, demand up” trend, with wheat prices rising steadily, though the year-on-year decline remains fairly pronounced. Wheat imports continue unabated, and the price gap between domestic and imported wheat has widened somewhat. It is expected that as wheat prices gradually recover, the supply-demand pattern in the circulation market will gradually ease.
Given that domestic wheat prices have entered a phased uptrend, it is recommended that flour processing enterprises increase grain procurement efforts ahead of time and appropriately raise inventories to ensure operations and reduce raw material costs; entities holding grain need to seize the opportunity of the phased recovery in wheat prices to sell at the right time.
Wheat prices show a clear year-on-year decline
After the grain supply in the circulation market was digested, the inversion between wheat prices in northern wheat areas and southern wheat areas eased noticeably, but because the price difference is not large, and taking circulation costs into account, large-scale cross-regional circulation is difficult. Since mid-to-late November, wheat prices in major domestic producing areas have risen steadily, with ordinary wheat prices rising by 10-60 yuan/tonne. Although domestic wheat market prices have recovered overall, compared with the same period last year the decline remains fairly pronounced, and prices are not attractive to either buyers or sellers, with sluggish demand constraining the activity of wheat market purchases and sales.
As of the end of November, domestic ordinary wheat market prices were generally 2300-2460 yuan/tonne, with some differences due to quality and regional supply and demand. Among these, the purchase price of ordinary wheat in Daming, Handan, Hebei was 2460 yuan/tonne (test weight 780g/l, moisture 13%). By comparison, in the same period last year the factory-gate price of ordinary wheat in northern wheat areas was 2500-2580 yuan/tonne, among which the factory-gate price of medium-grade ordinary white wheat in Shijiazhuang, Hebei was 2580 yuan/tonne.
Temporary storage inventories rise sharply year on year
Because wheat prices in the circulation market have recovered rather slowly, there is still a certain gap between them and the floor price of state temporary storage wheat auctions, and transactions of state temporary storage wheat have remained sluggish, with only scattered deals. Henan's state temporary storage wheat has failed to sell at auction for 5 consecutive weeks, and the current floor price of state temporary storage wheat auctions has a certain uplifting effect on the psychology of market buyers and sellers.
The huge policy-driven wheat inventory is difficult to bring to market in the short term because of its high price, greatly reducing the effective supply capacity of the circulation market and at the same time becoming the biggest obstacle constraining the trend of wheat prices later on. Because the remaining inventory of state temporary storage wheat from the 2014 crop is relatively high, state temporary storage wheat from the 2015 crop has not been put on the market.