Wheat reserve auctions see rebound in sales, but new wheat prices remain weak

According to market monitoring, since new wheat entered the market in 2015, national reserve wheat auctions have remained sluggish because the reserve wheat has no price advantage and processing demand is weak. According to statistics, as of early August, a total of 12,971,714 tons of grain sources had been offered, with actual sales of 385,678 tons, an average sales rate of 2.97%, and an average transaction price of 2,466-2,500 yuan/ton, basically selling at the auction reserve price. This reflects that current market demand for wheat flour is dismal, market operators lack confidence in the future of the wheat flour market, and the guiding role of the state wheat procurement policy on market prices has weakened. With abundant new wheat supplies in circulation and weak market prices, market operators' psychological expectations have declined, and purchasing and sales are becoming more cautious.

Reserve wheat sales rebound this week, but market participation remains low

On August 11, the results of national reserve wheat auctions showed that the Anhui and Henan markets together auctioned 1,146,900 tons of minimum-purchase-price wheat, a month-on-month decrease of 800 tons, indicating a decline in the quantity offered; a total of 8,100 tons were sold, an increase of 3,400 tons from last week; the sales rate was 0.7%, up 0.3 percentage points month on month. Although sales volume and the sales rate rebounded slightly, transaction prices were mostly at the auction reserve price. Without considering outbound and transportation costs, the auction price is higher than the current new wheat purchase price, and wheat operators' participation in the auction market remains low. Among them: Anhui planned to sell 847,000 tons of policy wheat, a month-on-month decrease of 628 tons, with actual sales of 4,234 tons, a sales rate of 0.5%, up 0.21 percentage points month on month, and an average transaction price of 2,481 yuan/ton, up 12 yuan/ton month on month. Among this, 332,500 tons of white wheat were offered, with actual sales of 1,390 tons, a sales rate of 0.42%, and an average transaction price of 2,460 yuan/ton; 516,400 tons of mixed wheat were planned for sale, with 2,427 tons sold, a sales rate of 0.47%, and an average transaction price of 2,492 yuan/ton. Henan planned to auction 299,900 tons of minimum-purchase-price wheat, with sales volume and sales rate of 3,800 tons and 1.28% respectively, an increase of 1,600 tons and 0.55 percentage points from last week, and an average transaction price of 2,456 yuan/ton, down 55 yuan/ton from last week. Sales volume and the sales rate rose slightly.

Hubei reserve wheat auctions saw sluggish sales, and Shandong saw all lots fail to sell. On August 11, Hubei province planned to sell 273,800 tons of policy wheat, with actual sales of 1,390 tons, a sales rate of 0.51%, and a transaction price of 2,460 yuan/ton. Among this, 3,562 tons of 2012 white wheat were planned for sale, 72,500 tons of mixed wheat were planned for sale, and 47,900 tons of 2014 mixed wheat were planned for sale, all of which failed to sell; 149,900 tons of 2014 white wheat were planned for sale, with actual sales of 1,390 tons, a sales rate of 0.93%. Shandong province planned to sell 23,900 tons of policy wheat, all of which failed to sell.

Summer grain harvest is again abundant, and new wheat prices show weakness

Since 2012, wheat market prices have been supported by the state procurement policy, and upside room has already been exhausted. This year, winter wheat output in the main producing areas is estimated to reach 247.2 billion jin, an increase of 7.1 billion jin from the previous year. In an environment where domestic wheat production has had consecutive bumper harvests, policy grain inventories remain high, and the state minimum-purchase-price procurement policy offers weaker support to market wheat prices, wheat prices are caught in a dilemma, unable to move clearly up or down. On the one hand, procurement progress is lower than the same period last year. According to statistics, as of August 5, various grain enterprises in 9 main producing areas including Anhui and Henan had purchased 51.38 million tons of newly produced wheat, a decrease of 12.93 million tons from the same period last year, with purchased wheat accounting for 41.57% of output. On the other hand, new wheat market prices are weakening, increasing procurement risk. At present, there is a relatively large quantity of new wheat circulating in the market, and the intensity of state policy wheat offerings has not diminished, putting greater supply pressure on the wheat market, and the price risk accumulated from earlier stockpiling during procurement is emerging. According to monitoring, last week wheat prices in the Anhui region continued to be stable but weak, with the purchase price of third-grade mixed wheat at 113.47 yuan/50 kg, down 0.92 yuan/50 kg from last week, a decline of 0.80%; the outbound price was 115.68 yuan/50 kg, down 0.96 yuan/50 kg from last week, a decline of 0.82%.