Wheat Purchases Down This Year

An article from the Daily Business News reports that this year's wheat purchases are down from last year. State-owned companies are getting a shrinking share of the grain as they have to compete with private-sector purchasers.

Grain bureau officials in Dezhou, a district of Shandong Province, describing this year's wheat purchase, said, "This year's volume is not that big, less than usual."

According to grain bureau statistics, wheat purchases in the 10 major wheat provinces as of July 5 totaled about 16 mmt, about half the amount that had been purchased last year at the same time (31.9 mmt).

The article doesn't explain why purchases are down so much this year. Perhaps last winter's drought had a bigger impact on wheat production than officials have been willing to admit.

The article concentrates mainly on the falling share of state-owned grain enterprises. This has been a common theme on the China Grain Net site since last year.

So far, state-owned companies have bought 64% of the wheat purchased. Last year it was 86%. In Shandong, state-owned company purchases so far total 10 mmt, down 2 mmt from last year.

A Shandong grain bureau official explains that there are many individual traders in the market as well as feed mills and some flour mills buying wheat. This year state-owned grain enterprises are having a harder time getting loans because the Agricultural Development Bank has tightened lending standards. Interest rates are higher too.

State-owned grain enterprises are not purchasing wheat to support prices either since the market price is higher than the minimum price set by the government.

Of course, grain bureau people warn that their weakened ability to buy grain could threaten the country's grain security. There is some speculation that the government could adjust its purchasing policy as it did during a similar period in 2008. At the end of 2008, the government rolled out a series of orders for provisional grain purcahses to support the market during the world financial crisis. [Could we be facing another one of those?]