How long can the wheat price rise last? Market outlook analysis
"Before the end of the year, I feel the price of ordinary wheat will rise above 1.25 yuan/jin, and may even reach as high as 1.3 yuan/jin." Old Mu, a wheat purchaser in Yanjin County, Henan Province, told the Futures Daily reporter that since entering August, more and more flour milling enterprises and large and medium-sized grain depots have come to Yanjin County to buy wheat, wheat of good quality that meets the national standard medium grade is almost gone, and wheat prices are bound to rise further later.
According to the reporter's understanding, there is currently a strong bullish sentiment in the domestic wheat market, and wheat and flour prices have also risen slightly. At the same time, many wheat traders have begun to buy and hoard better-quality wheat, and the tightening of effective market supply is obvious.
Compared with previous years, this year's wheat yield per unit area, total output and quality in China are not satisfactory. Because most production areas experienced rainy weather during the wheat harvest, both wheat output and quality declined, leading to the phenomenon that low-quality wheat had no buyers, and wheat prices in some production areas even fell sharply. But why is there now a strong bullish sentiment in the domestic wheat market again?
Zhang Wei, a wheat trader in Hengshui City, Hebei Province, told the reporter that after this year's new wheat came onto the market, most purchasing entities took a wait-and-see attitude because of its poor quality, while in order to protect farmers' interests from being harmed by the disaster, relevant institutions timely introduced a policy of relaxing purchasing standards and buying in large quantities in response to special circumstances such as the poor quality of the new wheat, and some production areas also successively launched local purchasing plans. This not only increased the purchase volume in the wheat market and made wheat market buying and selling more active, but more importantly also drove market entities to actively participate in purchasing, and wheat market prices were quickly boosted.
"As of now, the total minimum-price purchase volume of wheat in China's main wheat production areas is greater than the same period last year, and the total purchase volume of commercial wheat in society is also relatively large. In particular, most of the high-quality wheat that can circulate in the market has already been purchased and put into storage, and a structural supply tightening pattern has appeared in the market. The upward trend in wheat prices, especially high-quality wheat prices, will not change in the short term." Zhang Wei said.
However, in the view of Zhang Huijun, a flour processor in Puyang City, Henan Province, there is not much room for wheat prices to rise later.
"First, from the perspective of the total supply in the wheat market, it is sufficient. What is rising relatively fast in the current domestic wheat market is mainly high-quality wheat, while the supply of low-quality wheat is still very large and its price is relatively low. On the premise of ensuring product, quality and food safety, if high-quality wheat prices continue to rise, grain-using enterprises can increase their purchases of low-quality wheat through scientific blending, and by then demand for high-quality wheat will quickly decline. Second, although the flour industry has now entered its peak demand season and ex-factory flour prices have also been raised slightly, the processing profit of flour milling enterprises is still very low, the operating rate of the entire industry is still not high, and in addition the price of bran, a by-product of wheat processing, has fallen to about 0.5 yuan/jin. Flour milling enterprises, the major wheat demand users, cannot bear the cost pressure of continued wheat price rises. Finally, the pressure to destock the wheat market is still very great. The sale of wheat from the national reserve and temporary reserve can fully meet market demand. With no hope of wheat prices rising later, traders will also rush to sell off. I suggest everyone still view wheat price rises cautiously." Zhang Huijun analyzed.
In exchanges with some wheat traders, the reporter learned that the market expects a very high probability that relevant institutions will continue to implement the minimum-price purchasing policy in the domestic wheat market next year. From an analysis of China's wheat output, prices and adjustments to related agricultural product purchasing policies in recent years, the wheat market will continue to implement the minimum-price purchasing policy next year. Combined with the current situation of relatively large minimum-purchase-price wheat inventories, domestic wheat prices will mainly run steadily later, and policy characteristics will remain obvious. It is also learned that in recent years China's wheat sown area has been stable with a slight increase. Given that farmers' returns from growing other crops have not increased noticeably in recent years, it is estimated that there will not be much change in wheat sown area next year.