New Wheat Hits the Market as Consumption Weakens; May Import Volume May Decline

Due to weak wheat consumption in China, favorable prospects for new wheat production and the gradual market launch, China's wheat imports in May are expected to decline. Wheat imports for the 2014/2015 marketing year are forecast at 1.2 million tons.

This week, wheat in parts of Hunan, Jiangsu, Anhui and Henan has already begun to be harvested and purchased. As of May 28, because the market purchase price was below the national minimum purchase price of 1.18 yuan/jin, Jiangsu Province, Hubei Province and Anhui Province had respectively activated the minimum purchase price execution plan for wheat. To date, because wheat in Henan, Hebei and Shandong, among the main wheat-producing areas, has not yet reached the harvest period, the minimum purchase price execution plan for wheat has still not been activated.

New-Season Wheat Hits the Market; Strong-Gluten Wheat Prices Viewed Favorably

Monitoring shows that the prices of ordinary new wheat currently on the market are relatively low. The price of new wheat produced in Hubei delivered to a large flour enterprise in Handan, Hebei is 1.22 yuan/jin; delivered to a large flour enterprise in Hengshui, Hebei it is 1.23 yuan/jin; delivered to a large flour enterprise in the Heze area of Shandong it is 1.22 yuan/jin; delivered to a large flour enterprise in the Suqian area of Jiangsu it is 1.18 yuan/jin; and delivered to the Xiongxian area of Baoding, Hebei it is 1.21 yuan/jin. The purchase price in the Xiangyang area of Hubei is 1.13 yuan/jin, the purchase price in the Suizhou area is 1.1-1.12 yuan/jin, and the purchase price in the Yicheng area is 1.14 yuan/jin. The purchase price of new wheat produced in parts of Jiangsu is 1.16-1.17 yuan/jin.

⟦NL> Monitoring shows that there is little possibility of a later price rise for ordinary wheat nationwide. The main reasons are: first, due to abundant rainfall earlier, the moisture content of the new ordinary wheat currently on the market is relatively high, generally greater than 15%; second, the stocks of minimum-purchase-price wheat and rotated wheat on the market are relatively large; third, as the harvest period arrives, a large amount of wheat will come onto the market later, and processing enterprises are willing to free up inventory to purchase wheat; fourth, consumption of wheat products such as flour and bran is currently weak, and wheat processing enterprises are not strongly inclined to purchase.

The opening price of newly produced strong-gluten wheat may show a pattern of opening high and rising high. The main reasons: first, data from the General Administration of Customs show that China's wheat imports from January to April decreased by 1.6195 million tons compared with last year; second, surveys found that because strong-gluten wheat has low yields and is unstable as it is easily affected by the environment, and because its selling price is not much different from that of ordinary wheat, farmers are not highly motivated to plant strong-gluten wheat, and the planted area of strong-gluten wheat in China is gradually shrinking, which will inevitably lead to a decline in output; third, as living standards improve, people's demand for high-quality wheat continues to increase; fourth, last year strong-gluten wheat was snapped up, and the price continued to rise from 1.3 yuan/jin at the beginning, with traders making substantial profits. It is understood that traders remain optimistic about strong-gluten wheat this year and have a strong willingness to purchase.

Wheat and Flour Prices Stable; Bran Prices Decline

This week, the supply of old wheat on the market was sufficient, a small amount of new wheat came onto the market, while demand from flour processing enterprises was weak and feed demand for wheat was insufficient, so wheat prices continued a stable trend. On May 27, the wheat purchase price of flour milling enterprises in Shijiazhuang, Hebei was 2,580 yuan/ton, in Jinan, Shandong 2,550 yuan/ton, in Xuzhou, Jiangsu 2,540 yuan/ton, in Suzhou, Anhui 2,520 yuan/ton, and in Zhengzhou, Henan 2,580 yuan/ton; the port arrival price of 2014 ordinary wheat produced in Jiangsu at the port of Guangzhou, Guangdong was 2,600-2,630 yuan/ton, and at the port of Fuzhou, Fujian 2,590-2,620 yuan/ton, both flat with last week.

Flour consumption demand was sluggish, dealers were not highly motivated to purchase, and the sales situation of flour milling enterprises was average; the operating rate of flour processing enterprises was average, with the operating rate of large flour mills at 90%-100% and that of small flour enterprises at only 30%-40%, flour supply was sufficient, and ex-factory prices were stable. On May 27, the ex-factory price of special first-grade flour in Shijiazhuang, Hebei was 3,140 yuan/ton, in Jinan, Shandong 3,140 yuan/ton, in Zhengzhou, Henan 3,120 yuan/ton, in Xuzhou, Jiangsu 3,080 yuan/ton, and in Suzhou, Anhui about 3,080 yuan/ton, all flat with last week.

Because flour processing plants continued to operate, ensuring sufficient bran supply, while demand from the pig breeding industry was sluggish and dealers and feed mills were not strongly inclined to purchase, bran prices in some areas continued to decline. On May 27, the bran ex-factory price in Shijiazhuang, Hebei was 1,160 yuan/ton, down 70 yuan/ton from the same period last week; in Jinan, Shandong 1,140 yuan/ton, down 90 yuan/ton; in Zhengzhou, Henan 1,160 yuan/ton, down 70 yuan/ton; in Suzhou, Anhui    1,260 yuan/ton, down 80 yuan/ton; and in Xuzhou, Jiangsu 1,320 yuan/ton, down 30 yuan/ton.

Because bran prices continued to fall, losses at flour milling enterprises in various regions intensified, and theoretical processing profits declined. On May 27, the processing profit in Shijiazhuang, Hebei was -106 yuan/ton, in Jinan, Shandong -87 yuan/ton, and in Zhengzhou, Henan -106 yuan/ton. Wheat and corn prices in various regions remained stable, and the wheat-to-corn price ratio was generally stable.

The wheat-to-corn price ratio in the Jinan area of Shandong was 1.07, in the Suzhou area of Anhui 1.1, in the Zhengzhou area of Henan 1.12, and in the Guangzhou area of Guangdong 1.06. At present, the wheat-to-corn price spread in various regions remains at 160-280 yuan/ton.

China's Wheat Imports Rose Month on Month in April

Customs data show that in April China imported 241,400 tons of wheat, an increase of 89,200 tons month on month, the highest monthly import volume so far this year; compared with the same period last year, wheat imports in April decreased by 132,200 tons, a decline of 35.39%.

Wheat imports from January to April declined year on year, with cumulative wheat imports of 597,800 tons, a decrease of 1.6195 million tons from the same period last year, a decline of 73.04%.

As of now, in the 2014/2015 marketing year China has imported a total of 1.127 million tons of wheat, a decrease of 5.4196 million tons from the same period of the 2013/2014 marketing year, a decline of 82.79%.

Calculated on the basis of the closing price on May 27, the duty-paid price of US No. 2 soft red winter wheat for May shipment arriving at Chinese ports was 1,730 yuan/ton, 900 yuan/ton lower than the port sales price of domestic wheat of the same quality, while the duty-paid port arrival price of US soft red winter wheat in the same period last year was 2,257 yuan/ton; the duty-paid port arrival price of US No. 2 hard red winter wheat for May shipment was 1,894 yuan/ton, 1,186 yuan/ton lower than the port sales price of domestic high-quality wheat of the same quality, while the duty-paid port arrival price of US soft red winter wheat in the same period last year was 2,700 yuan/ton.