Wheat prices are still bottoming out, and traders are eager to unload their inventories

Affected by sluggish demand for food wheat, the disappearance of feed demand, large-scale auction sales of state-reserved wheat, and the rotation and release of local reserves of wheat from warehouses, domestic wheat futures and spot prices have continued to decline since October. Traders are eager to unload their wheat inventories, and in some regions there are phenomena of competing price cuts to sell.

Traders eager to unload inventories; wheat prices continue to bottom out

“You reporters have lots of information and a wide circle of friends, so help me ask if anyone is buying wheat.” A reporter from Futures Daily has recently been receiving calls from friends engaged in wheat trading, and their common topic is how to sell off their stored wheat.

Affected by sluggish demand for food wheat, the disappearance of feed demand, large-scale auction sales of state-reserved wheat, and the rotation and release of local reserves of wheat from warehouses, domestic wheat futures and spot prices have continued to decline since October. Among them, the price of the Zhengzhou strong gluten wheat main 1501 contract has fallen by about 200 yuan/ton cumulatively, and has already broken below the transaction price in the ordinary wheat spot market. Yesterday it even hit a new low in nearly a year of 2536 yuan/ton.

According to analysis by Li Tianyi, a wheat trader in Xinyang City, Henan Province, the reason wheat prices have fallen sharply is that, in addition to people eating more rice, which has gradually reduced the demand for wheat as food, the prices of most feed ingredients such as corn, early indica rice, soybean meal, rapeseed meal, and cottonseed meal have all continued to decline. This has basically eliminated the feed demand for wheat. In previous years, the domestic feed demand for wheat was 20 million to 25 million tons, which was one of the main forces driving wheat prices up. Now that this force has disappeared, it is estimated that wheat prices will continue to seek a bottom.

“Most of the wheat produced in Xinyang and southern Zhumadian is used for feed processing and is mainly sold to Guangzhou, Guangxi, Sichuan, and other places. As the end of the year approaches, this should be the time when buyers gather, but this year many wheat operators have few visitors at their doors. There are very few customers purchasing feed wheat. Many small operators cannot hold on and have already begun to dispose of their wheat inventories at low prices.” Li Tianyi said.

⟦NL> According to the reporter's understanding, the ex-factory price of rapeseed meal from small oil mills in Hunan, Hubei, and other places is only 1600 yuan/ton, while at this time in previous years it was around 2100 yuan/ton. At the same time, the prices of soybean meal, cottonseed meal, and corn are also at historical lows. More and more feed enterprises have adjusted their raw material formulas, and wheat has basically withdrawn from the feed sector, which has dragged down wheat demand.

“Jiangsu Province increased its auction sales of state-reserved wheat after entering October. Current market supply is sufficient, and grain-using enterprises simply do not need to travel to Henan, Hebei, and other places to purchase wheat as they did in previous years.” said Wang Jin, a wheat dealer in Yixing, Jiangsu. Apart from some high-quality wheat varieties where supply is slightly tight and transaction prices are relatively high, the prices of ordinary wheat of various varieties are now relatively low. Even so, many flour milling enterprises are still struggling, mainly because flour sales volume and prices are as sluggish as wheat. The domestic wheat food consumption market is constantly being squeezed by rice, limiting the room for wheat demand growth.

At present, light and temperature conditions in domestic winter wheat production areas are relatively suitable for wheat growth, and coupled with good soil moisture, this is conducive to tillering and root growth of winter wheat. The market expects that next year's wheat output is likely to increase. In addition, the sown area of wheat in many production areas has increased, and the government has made clear that it will not raise the minimum purchase price of wheat next year. This has made the market relatively bearish on the outlook for wheat. Many traders are now eager to unload their wheat inventories, and in some regional markets there are phenomena of competing price cuts to sell.

Wheat trader Kong Ming told the reporter that he recently took 500 tons of wheat from the Zhengzhou strong gluten wheat futures market, originally planning to hoard it for a period and use the seasonal rise pattern in the wheat market to earn a seasonal price difference. Unexpectedly, wheat prices fell again and again. In addition, the 500 tons of wheat were discounted by 3.7 tons for moisture, and he lost tens of thousands of yuan on the deal.

“In the short term, there is no hope of Zhengzhou strong gluten wheat rising, and ordinary wheat is estimated to still have room to fall. I do not plan to do wheat trading again within the year. I will re-enter the market after next year's market situation becomes clear.” Kong Ming plans to temporarily withdraw from the wheat market.