China to Stockpile More Wheat as Heavy Rains Force Local Sales

(Bloomberg) -- China is stepping up state purchases of wheat to support local prices, after heavy rains forced some farmers to unload their crop into a market already heaving with grain.

Sinograin and its affiliates will buy more new crop wheat for their reserves, according to a WeChat post on Wednesday. The state stockpiler made a similar pledge at the start of the harvest in June, but prices have continued to hover near three-year lows on a combination of ample supply and poor demand.

The recent downpour in northern China, a major production hub for wheat, has worsened the glut as farmers and traders rush to sell rather than risk moisture damage to their crops in storage. At the same time, a weak economy is hampering consumption of flour for items like noodles and bread.

“This year has seen record production, weak demand, and a record pace of imports,” said Darin Friedrichs, co-founder of Sitonia Consulting Co. “State reserve purchases helped to stabilize prices after harvest, but prices have continued to be weak.” 

China has reported another bumper wheat harvest of 138 million tons, 2.7% higher than last year. Meanwhile, imports in the first half jumped 16% to 9.3 million tons, although weak local prices are likely to curb China’s appetite for foreign shipments going forward.

Global grains markets are also under pressure, with Chicago wheat and corn hovering around four-year lows, while soybeans remain depressed due to improving weather and a lack of Chinese demand. 

On the Wire

China’s thermal coal price is expected to remain flat over the summer as rising hydropower generation impacts demand, according to the China Coal Transportation and Distribution Association.

China’s manufacturing activity unexpectedly shrank for the first time in nine months in July, a private survey showed, a sign the country’s export machine might be cooling, darkening the economy’s outlook.

Companies with ties to China and other foreign adversaries would be barred from getting a tax credit meant to bolster domestic energy manufacturing under legislation advanced Wednesday by Democratic Senator Sherrod Brown.

This Week’s Diary

(All times Beijing unless noted.)

Thursday, Aug. 1:

Friday, Aug. 2:

©2024 Bloomberg L.P.