Society
Soaring wheat prices make farmers reluctant to sell
(Xinhua)
Updated: 2010-07-07 14:20
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NANJING - Chinese farmers are holding their wheat and reluctant to sell on expectations that the current high prices would continue to rise as market reflects that wheat production and quality might be affected by persistent low temperatures during the growing season.
"Wheat prices at some purchase stations have topped 1.04 yuan per jin (2.08 yuan per kilogram, which is about $0.3 per kilogram). It's beyond the maximum price I can offer, which is 2.04 yuan per kilogram," said Gu Hongxin, a grain broker who purchases wheat for national reserves and food companies in Yancheng city, East China's Jiangsu province.
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China has set minimum purchasing prices for grain, including wheat and rice, since 2004. The government will buy grain from farmers at the state-set price when the market price drops below it.
This year's minimum purchase prices are at 1.72 to 1.8 yuan per kilogram, according to the National Development and Reform Commission. Apparently, the current market prices are much higher than the state's minimum purchase prices.
"The wheat prices are increasing on a daily basis, sometimes even on a half-day basis. Buyers are rushing to purchase, which I haven't seen before," said Li Chunhu, head of the Xingqiao National Grain Depot in Sheyang county, Jiangsu province.
The competition in the wheat purchasing market is very fierce, as grain and food companies thought this year's wheat output would be affected by the cold weather since last winter. Therefore, they rushed to store wheat, which helped push up prices, said Zhu Shoudong, vice director of Peixian county's food administration, Jiangsu province.
"We are under a lot of pressure as farmers are reluctant to sell because they are expecting the prices to go higher," Li Chunhu said.
"Our depot has only managed to purchase 4,000 tons of wheat so far this year, only 10 percent of that for the same period last year," he added.
As of June 15, China's main wheat producing areas had altogether purchased nearly 2.94 million tons of wheat, which was 4.61 million tons less than the same period last year, according to statistics from the State Administration of Grain.
One reason for the drastic purchase fall is that the cold weather had deferred the time for ripening and the reaping was also postponed by the rainy weather, according to Zhang Rongsheng, a Xinhua analyst.
Meanwhile, some grain brokers have also hoarded grain for later sale.
However, China is totally capable of regulating wheat prices as it has a large amount of grain reserves, said Zhang.
Eventually, hoarders would get hurt, he said.
Meanwhile, he also advised farmers not to store grain, as they usually don't have professional storage facilities, which might hurt the quality of their wheat.
The Grain Administration of Jiangsu province has already sent inspection panels to supervise the grain purchase markets, asking companies to stay clear-minded and purchase at reasonable prices.
Despite challenges posted by the extreme weather, China's Ministry of Agriculture (MOA) said in June that China's harvest of summer grain crops this year is still pending, with the output predicted to approach the same level as last year.
In April the government unveiled funding plans worth more than 2.4 billion yuan to ensure summer grain output, which accounts for about one quarter of its annual food yield, according to the MOA.
China's summer grain output rose six years in a row to top 123.35 million tons last year, 2.6 million tons more than the previous year. The total grain output reached 530.8 million tons last year, the sixth consecutive year of growth.