The regular wheat auction in China is in demand. Last week, almost all offered lots were sold. The reason? Corn is expensive and the animal feed industry is looking for alternatives. Wheat is extremely suitable.
The regular wheat auction of the state reserves in China achieved a sales percentage of more than 50% last week. This is somewhat striking, because at the end of December that percentage still varied between 12% and 18%. As a result of the good sales week, almost the entire supply from the state reserves has been sold. This concerns a volume of approximately 3,9 million tons, which amounts to a percentage of 99,7% of the total supply.
The largest group of buyers consists of animal feed producers who are looking for an alternative raw material for maize. The domestic price of this raw material has risen considerably in the past period. A Chinese trader told Reuters that these parties were willing to secure supplies at all costs. "An average trader, like me, can't compete with that."
The average selling price of wheat rose 7% last week to $386,27 per tonne. Converted to euros, this amounts to €318,25 per tonne, which is considerably higher than the current Matif quotation: €213,50 per tonne.
Coronavirus flares up
Not only the higher domestic maize price is causing some panic in the market. The country has also reported a new wave of coronavirus outbreaks in recent weeks. As a result, major grain producers in Hebei and Heilongjiang have closed. This has a major effect on logistics and industrial activities. “People are concerned about supply and logistics. This is driving panic buying,” said Darin Friedrichs, senior analyst at StoneX.