China’s wheat sale from reserves continue to fall after government regulation

China’s wheat auction from its state reserves fell further from the previous week, according to an official statement published on Monday, amid flat demand and a government move to curb trade.

China sold 311,837 tonnes of wheat, or only 7.75% of the total offered, at an auction of state reserves last week, the National Grain Trade Center said in a statement.

“The end users have built up ample stocks, plus the government’s restriction on traders’ participation in the auction. Demand is not that strong either, so sale was low,” said a trader with an international trading house.

“What’s more, the new wheat harvest will hit the market soon,” said the trader, who declined to be named due to sensitivity of the matter.

Many feed producers and flour mills have inventories that can last until the end of June, the trader added.

The volume of wheat sold, at an average price of 2,399 yuan ($369.82) per tonne, declined further from the prior week after the government raised the floor price of the auction, in an effort to curb demand from the country’s massive feed sector for the food grain.

“The wheat bought by feed producers during auctions have arrived gradually and now they are just digesting stocks. While operation rate at mill flours is also low. Demand overall is not strong,” said Li Hongchao, senior analyst with trade website Myagric.com.

Chinese traders and feed producers stepped up purchases of wheat from state reserves to replace corn in the feed recipe, as prices of the latter soared to record high levels.

Source: Reuters (Reporting by Hallie Gu, Beijing Newsroom, and Shivani Singh; Editing by Kim Coghill and Krishna Chandra Eluri)