Temporary reserve wheat auctions show uneven results, overall market remains quiet nationwide

Recently, flour demand has been stable and wheat supply abundant. Large and medium-sized flour milling enterprises slowed their purchasing pace after buying large quantities of wheat earlier, which affected the transaction results of policy-driven wheat auctions. Anhui Province has begun trading 2014 temporary reserve wheat, while 2013 temporary reserve wheat has met with a cold reception, with zero transactions for three consecutive weeks. In Hubei Province and Henan Province, transactions of 2013 temporary reserve wheat improved slightly compared with last week, but prices were relatively weak. Overall, transactions of 2013 temporary reserve wheat under the minimum purchase price policy have been relatively quiet.

In Hubei and Henan, transactions of 2013 temporary reserve wheat have been slow. As of February 3, 2015, Hubei Province had sold a cumulative total of 690,000 tons of 2013 temporary reserve wheat, with 70,000 tons sold cumulatively in January, and an estimated 300,000-400,000 tons still available for auction. Henan Province had sold a cumulative total of 590,000 tons of 2013 temporary reserve wheat, with 140,000 tons sold cumulatively in January, and an estimated 200,000-300,000 tons still available for auction. Currently, flour milling enterprises are not very active in purchasing wheat. At the normal release pace, auctions of 2013 temporary reserve wheat in the above areas will continue for another 2-3 months, with transactions generally remaining slow.

The transaction rate of 2014 temporary reserve wheat in the Jiangsu-Anhui area has been steadily declining. According to flour milling enterprises, flour sales this year have been even less satisfactory than in previous years, and the boost from the Spring Festival has fallen short of expectations, making flour milling enterprises more cautious in wheat procurement. Affected by this, the transaction rate of 2014 temporary reserve wheat in the Jiangsu-Anhui area has steadily declined, while the average transaction price has remained basically stable at last week's level. Jiangsu's transaction rate this week was only 56.10%, the lowest since October 2012. Anhui's transaction rate was only 19.65%, the lowest of the past three auctions.

Since January, large and medium-sized flour milling enterprises have won large quantities of temporary reserve wheat in the state special wheat auction transactions. As the temporary reserve wheat is gradually released from warehouses, the earlier situation of low inventories has improved somewhat. Currently, flour demand is generally stable, with no obvious signs of sustained improvement. In addition, market participants hold relatively consistent views on the market, wheat procurement volumes are not large, and production mostly relies on enterprises' existing inventories and newly auctioned wheat delivered to factories. It is expected that transaction results of policy-driven wheat auctions may remain quiet in the near term.