A two-day auction for 2.5 million tons of state wheat reserves
opened on Wednesday at the Henan Provincial Grain Trade Market,
which is conducting the largest such auction in China.
Auction volumes have risen sharply this year, compared with just
a few months ago. In late 2007, auctions were no more than a few
hundred thousand tons, but two auctions in January offered 2
million tons each time. There are usually two auctions per
month.
The auctions are meant to stabilize market prices and prevent
private enterprises from holding grain stocks off the market in
hopes of profit.
"The auction was entrusted to us by the China Grain Reserve
Corporation. It is the largest sale of wheat reserves since China
imposed a minimum grain purchase price to rein the grain market in
2006," said Huang Shang, deputy manager of the market. The auction
ends on Thursday.
Minimum grain prices were introduced to encourage grain
production.
"Buyers have responded to the auction enthusiastically. The
market received 2,700 bids on Wednesday morning," said Huang.
Bidders are from flour producers and baking concerns.
China's National Development and Reform Commission announced on
Feb. 8 that the minimum purchase price for wheat and rice in 2008
will be raised slightly. The price will be 70 yuan (about 9.8 U.S.
dollars) to 75 yuan per 50 kilograms, up 1.4 percent to 4 percent,
on average, from 2007.
"Wheat and flour plants have been prepared for the anticipated
price surge this year. The rising margin is still under control,"
said Huang Kai, a local wheat buyer.
He said he believed that larger grain reserve sales would be
effective in preventing hoarding and stabilizing the market
price.
Of the wheat being auctioned, 1.5 million tons were harvested in
2006 and 1 million tons were harvested in 2007.
According to figures from the State Administration of Grains,
China produced 501.5 million tons of grain in 2007, the fourth
consecutive year of increase despite months of severe drought. The
country ended the year with a relatively high level of grain
reserves.
"China has been substantially enlarging the selling of wheat
reserves since November last year, when reserves sold at a single
auction rose to 300,000 tons from 100,000 tons before October. The
strong selling momentum will continue this year," said Huang.
He said that the snowstorms that hit southern China in
mid-January had taken a limited toll on winter wheat crops in the
north. More than 40 percent of the wheat reserves come from
northern Henan Province.
(Xinhua News Agency February 21, 2008)
