Chinese farmers' wheat sales were down 30 percent this year, but the State Administration of Grain and Commodity Reserves says not to worry because there are plenty of reserves. Authorities plan to offer 2 million metric tons of wheat reserves for sale weekly to ensure stable supplies, but results of the first auction were underwhelming.
Grain Administration statistics say a total of 50.15 mmt was procured from this year's wheat harvest as of September 30, 2018, the end of the main procurement season. That was 21.9 mmt less--about 30% less--than the volume of wheat procured during 2017. By comparison, the National Bureau of Statistics estimated that wheat production was 128.35 mmt, down 2.4% from last year. If these numbers are both true, farmers have sold less than 40% of the wheat they produced.
The Grain Reserve Administration explains that the sharp drop in wheat sales is due to a combination of policy reforms and weather factors. This year the minimum price procurement program was reformed to make policy-type procurement a supplement--not the primary marketing channel for wheat. The Reserve Administration says 90% of wheat sales this year were to "marketized" purchasers (not to government granaries), up 30 percentage points from last year. Consequently, farmers are holding their wheat longer and have retained a higher proportion of wheat beyond September 30 than usual.
The Administration also attributes the decline in sales to lower production and poor quality of this year's wheat harvest in Hubei, Anhui, and Henan Province. The Reserve administration says farmers in these regions have retained much of their wheat to use as animal feed or sold it to neighbors for that purpose. Statistics show that wheat sales were down nearly half in Henan, the biggest wheat-producing province, and in Anhui.
The Administration said that wheat prices are stable and a rational price premium of 10% or so has emerged for quality wheat. The Administration emphasizes that imports of wheat from Canada and Australia are used to mix with domestic wheat, imports are "small," and China has a high degree of self-sufficiency. Last year's imports of 4.4 mmt equaled 3% of consumption, the Administration said. Wheat imports for January-August 2018 totaled 2.23 mmt, down 1 mmt.
[This blog notes that the 2017 imports of 4.4 mmt would have equaled 6% of the volume of wheat that actually entered formal marketing channels.]
While the Administration insists that the poor quality wheat crop had minimal effect on supply and demand, it nevertheless announces that auctions of wheat from reserves have been resumed this week to ensure stable supplies and stable prices. Plans are to offer 2 mmt of reserve wheat for auction each week.
The first auction on October 10 sold 143,629 mt of the nearly 2 mmt offered, at an average price of 2,427 yuan/mt (about $353/mt). The wheat was from 2013, 2014, and 2015.
Grain Administration statistics say a total of 50.15 mmt was procured from this year's wheat harvest as of September 30, 2018, the end of the main procurement season. That was 21.9 mmt less--about 30% less--than the volume of wheat procured during 2017. By comparison, the National Bureau of Statistics estimated that wheat production was 128.35 mmt, down 2.4% from last year. If these numbers are both true, farmers have sold less than 40% of the wheat they produced.
| China 2018 wheat procurement | ||
| Province | 2018 volume | change from 2017 |
| Million metric tons | ||
| Henan | 12.065 | -10.97 |
| Jiangsu | 10.207 | -2.212 |
| Shandong | 9.274 | -1.574 |
| Anhui | 5.325 | -4.566 |
| Hebei | 4.698 | -1.094 |
| Hubei | 1.605 | -0.916 |
| Total | 50.152 | -21.907 |
The Grain Reserve Administration explains that the sharp drop in wheat sales is due to a combination of policy reforms and weather factors. This year the minimum price procurement program was reformed to make policy-type procurement a supplement--not the primary marketing channel for wheat. The Reserve Administration says 90% of wheat sales this year were to "marketized" purchasers (not to government granaries), up 30 percentage points from last year. Consequently, farmers are holding their wheat longer and have retained a higher proportion of wheat beyond September 30 than usual.
The Administration also attributes the decline in sales to lower production and poor quality of this year's wheat harvest in Hubei, Anhui, and Henan Province. The Reserve administration says farmers in these regions have retained much of their wheat to use as animal feed or sold it to neighbors for that purpose. Statistics show that wheat sales were down nearly half in Henan, the biggest wheat-producing province, and in Anhui.
The Administration said that wheat prices are stable and a rational price premium of 10% or so has emerged for quality wheat. The Administration emphasizes that imports of wheat from Canada and Australia are used to mix with domestic wheat, imports are "small," and China has a high degree of self-sufficiency. Last year's imports of 4.4 mmt equaled 3% of consumption, the Administration said. Wheat imports for January-August 2018 totaled 2.23 mmt, down 1 mmt.
[This blog notes that the 2017 imports of 4.4 mmt would have equaled 6% of the volume of wheat that actually entered formal marketing channels.]
While the Administration insists that the poor quality wheat crop had minimal effect on supply and demand, it nevertheless announces that auctions of wheat from reserves have been resumed this week to ensure stable supplies and stable prices. Plans are to offer 2 mmt of reserve wheat for auction each week.
The first auction on October 10 sold 143,629 mt of the nearly 2 mmt offered, at an average price of 2,427 yuan/mt (about $353/mt). The wheat was from 2013, 2014, and 2015.
Comments
One question: has the MOA not published its supply and demand report this month?
A great job!!