China is completing one of the biggest wheat harvests ever this month. China doesn't need all that wheat, and the government is expected to purchase a significant chunk of the crop to prop up the price and keep its farmers happy.
Official news media reports that the summer grain harvest is 90 percent complete. "Summer grain" consists mainly of wheat that was planted last fall, stayed in the ground through the winter and is ready for harvest in early summer. Agriculture Minister Han Changfu estimates that yield is up this year and the proportion of "quality" wheat is up 2.8 percentage points, despite drought in some areas, warm winter temperatures, and worries about covid impacts on field management. Han says various levels of government spent 160 million yuan ($22.9 million) to prevent wheat scab, rust, and pest damage to the crop.
China Grain Net estimates that the wheat crop will be about 2 percent larger than in the last 10 years, but not as big as in 2019. The weather has been favorable and there has been no big rain in the wheat-growing region during the harvest. They think improved production techniques by large-scale farms also contribute to a big harvest.
China Grain Net explains that China's minimum price program for wheat puts a floor under wheat prices. Reforms in recent years called for the private sector to play the primary role in purchasing wheat and determining prices, but the government will enter the market to purchase wheat when the market price falls below the minimum of 2240 yuan ($320) per metric ton for the 2020 crop announced last October. China Grain Net describes the minimum price as a "weathervane" for the market and wheat market players have a saying, "There's no telling how much the wheat price will rise, but it won't fall in the short-term."
On June 8, the average purchase price for wheat ranged from 2080 to 2690 yuan per metric ton and the national average was 2276 yuan, according to the commodity and grain reserve bureau. China Grain Net estimated the average price in production areas at 2320 yuan on June 12. There was a surge in wheat demand in March and April due to covid-driven hoarding, but prices have dropped as the new crop came on the market and demand tailed off during the summer. China Grain Net estimates the fob price for U.S. wheat at 1625 yuan per metric ton and the landed price, including taxes, at 2634 yuan.
The marketing season for wheat runs from June through September, and the harvest and procurement of wheat proceeds from south to north in the six provinces that are eligible for the minimum price program. The program can be launched when the market price is below the minimum for a certain number of days. The southernmost provinces--Hubei, Anhui, and Jiangsu--have already launched their minimum price programs for 2020. In Henan, the largest wheat-growing province, conditions vary across regions, but China Grain Net expects Henan to launch its minimum price program by June 20. Shandong and Hebei Provinces historically have purchased less wheat at minimum prices, but Shandong announced that it has 71 warehouses ready to store wheat if the program is launched there.
China Grain Net estimates that 15 million metric tons of wheat will be purchased at minimum prices from the 2020 crop. By comparison, 22.27 mmt was purchased at minimum prices in 2019. That was 16 percent of wheat produced and 31 percent of all wheat procured last year.
On June 10, the government offered to sell over 3 million metric tons of old wheat from reserves, but only 46,100 metric tons sold. The previous auction had sold only 67,000 metric tons.
This year's purchases will add to a wheat stockpile that China Grain Net estimates to already be a mountainous 80 million metric tons.
Official news media reports that the summer grain harvest is 90 percent complete. "Summer grain" consists mainly of wheat that was planted last fall, stayed in the ground through the winter and is ready for harvest in early summer. Agriculture Minister Han Changfu estimates that yield is up this year and the proportion of "quality" wheat is up 2.8 percentage points, despite drought in some areas, warm winter temperatures, and worries about covid impacts on field management. Han says various levels of government spent 160 million yuan ($22.9 million) to prevent wheat scab, rust, and pest damage to the crop.
China Grain Net estimates that the wheat crop will be about 2 percent larger than in the last 10 years, but not as big as in 2019. The weather has been favorable and there has been no big rain in the wheat-growing region during the harvest. They think improved production techniques by large-scale farms also contribute to a big harvest.
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| China's main wheat-growing provinces |
| When Chinese provinces began purchasing wheat at minimum prices | ||||||
| Year | Hubei | Anhui | Jiangsu | Henan | Shandong | Hebei |
| 2016 | June 1 | May 31 | June 3 | June 6 | June 30 | June 30 |
| 2017 | June 7 | May 31 | June 7 | June 6 | July 6 | July 6 |
| 2018 | none | June 6 | June 12 | June 13 | none | none |
| 2019 | July 11 | June 5 | June 12 | July 2 | July 14 | July 19 |
| 2020 | June 9 | June 10 | June 12 | |||
| Source: http://www.cngrain.com/Publish/1/671024.html | ||||||
China Grain Net explains that China's minimum price program for wheat puts a floor under wheat prices. Reforms in recent years called for the private sector to play the primary role in purchasing wheat and determining prices, but the government will enter the market to purchase wheat when the market price falls below the minimum of 2240 yuan ($320) per metric ton for the 2020 crop announced last October. China Grain Net describes the minimum price as a "weathervane" for the market and wheat market players have a saying, "There's no telling how much the wheat price will rise, but it won't fall in the short-term."
On June 8, the average purchase price for wheat ranged from 2080 to 2690 yuan per metric ton and the national average was 2276 yuan, according to the commodity and grain reserve bureau. China Grain Net estimated the average price in production areas at 2320 yuan on June 12. There was a surge in wheat demand in March and April due to covid-driven hoarding, but prices have dropped as the new crop came on the market and demand tailed off during the summer. China Grain Net estimates the fob price for U.S. wheat at 1625 yuan per metric ton and the landed price, including taxes, at 2634 yuan.
The marketing season for wheat runs from June through September, and the harvest and procurement of wheat proceeds from south to north in the six provinces that are eligible for the minimum price program. The program can be launched when the market price is below the minimum for a certain number of days. The southernmost provinces--Hubei, Anhui, and Jiangsu--have already launched their minimum price programs for 2020. In Henan, the largest wheat-growing province, conditions vary across regions, but China Grain Net expects Henan to launch its minimum price program by June 20. Shandong and Hebei Provinces historically have purchased less wheat at minimum prices, but Shandong announced that it has 71 warehouses ready to store wheat if the program is launched there.
China Grain Net estimates that 15 million metric tons of wheat will be purchased at minimum prices from the 2020 crop. By comparison, 22.27 mmt was purchased at minimum prices in 2019. That was 16 percent of wheat produced and 31 percent of all wheat procured last year.
On June 10, the government offered to sell over 3 million metric tons of old wheat from reserves, but only 46,100 metric tons sold. The previous auction had sold only 67,000 metric tons.
This year's purchases will add to a wheat stockpile that China Grain Net estimates to already be a mountainous 80 million metric tons.
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