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Soaring wheat prices in China make farmers reluctant to sell

07-07-2010 14:22 BJT Special Report:

NANJING, July 7 (Xinhua) -- Chinese farmers are holding their wheat and reluctant to sell on expectations that the current high prices would continue to rise as market reflects that wheat production and quality might be affected by persistent low temperatures during the growing season.

"Wheat prices at some purchase stations have topped 1.04 yuan per jin (2.08 yuan per kilogram, which is about 0.3 U.S. dollars per kilogram). It's beyond the maximum price I can offer, which is 2.04 yuan per kilogram," said Gu Hongxin, a grain broker who purchases wheat for national reserves and food companies in Yancheng City, east China's Jiangsu Province.

Last year, the price was 1.72 yuan per kilogram, he said.

China has set minimum purchasing prices for grain, including wheat and rice, since 2004. The government will buy grain from farmers at the state-set price when the market price drops below it.

This year's minimum purchase prices are at 1.72 to 1.8 yuan per kilogram, according to the National Development and Reform Commission. Apparently, the current market prices are much higher than the state's minimum purchase prices.

"The wheat prices are increasing on a daily basis, sometimes even on a half-day basis. Buyers are rushing to purchase, which I haven't seen before," said Li Chunhu, head of the Xingqiao National Grain Depot in Sheyang County, Jiangsu Province.

The competition in the wheat purchasing market is very fierce, as grain and food companies thought this year's wheat output would be affected by the cold weather since last winter. Therefore, they rushed to store wheat, which helped push up prices, said Zhu Shoudong, vice director of Peixian County's food administration, Jiangsu Province.

"We are under a lot of pressure as farmers are reluctant to sell because they are expecting the prices to go higher," Li Chunhu said.

"Our depot has only managed to purchase 4,000 tonnes of wheat so far this year, only 10 percent of that for the same period last year," he added.

As of June 15, China's main wheat producing areas had altogether purchased nearly 2.94 million tones of wheat, which was 4.61 million tonnes less than the same period last year, according to statistics from the State Administration of Grain.

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