Is there a chance for a rebound in the wheat market under the "glass heart" before taking over the new one?

Special analyst Zhang Rongsheng

【Main view】The current wheat market fundamentals are still not obviously good, and the market mentality is relatively sensitive and fragile. Under the circumstance that it is difficult to have a significant improvement in demand, considering the current situation of continuous reserve delivery and low inventory of grain users, it is expected that the trend of wheat prices before the new wheat market will be mainly weak and volatile. However, supported by the reduction of grain sources at the grassroots level and the demand for stocking before May Day, the wheat market may still have a chance to rebound in stages.

Since the Qingming Festival, the purchase price of domestic wheat has continued to fall, and the panic in the market has spread rapidly. At present, the purchase price in the production area is mostly concentrated at 1.34~1.39 yuan/jin, and some flour mills have fallen below 1.35 yuan/jin, and the market price increase has basically been given back since the end of March, and the wheat price has returned to the origin in late January 2024. Monitoring shows that the current milling enterprise Xinpumai (national standard second class) in the main producing areas of the factory price of 2700 ~ 2720 yuan / ton, down 20 ~ 60 yuan / ton compared with before the Qingming Festival.

Wheat prices in the main producing areas are weak

According to the market, although the surplus grain at the grassroots level of the wheat market accounts for a small proportion, and some grain merchants have different shipping mentalities, the reserve of old wheat at all levels continues to be released, and the supply of grain in the market is abundant. Downstream flour and bran shipments are slow, flour enterprises are under great operating pressure, and the operating load remains at a low level.

At present, the price of Xinpumai net grain in Handan Milling Enterprise in Hebei Province is 1.35~1.37 yuan/jin, Shandong Heze is 1.345~1.375 yuan/jin, Henan Xinxiang is 1.345~1.365 yuan/jin, Jiangsu Xuzhou is 1.365~1.385 yuan/jin, Anhui Bozhou is 1.35~1.365 yuan/jin, and some areas are down 0.01~0.035 yuan/jin compared with before the Qingming Festival.

The current purchase price of "Gaoyou 2018" in Hebei is 3150 yuan/ton, the purchase price of "Zhengmai 366" in Henan is 3190 yuan/ton, and the purchase price of "Jinan 17" in Shandong is 3020 yuan/ton, which is the same as before the Qingming Festival. It is understood that the demand for special flour is weak in the near future, and milling enterprises mainly use imported wheat, and there is less domestic high-quality wheat surplus grain in the market, and the price is basically stable.

On April 9, Shanghai Reserves purchased 40,000 tons of wheat in 2023, with a transaction price of 2,745~2,780 yuan/ton and an average transaction price of 2,766 yuan/ton, which exceeded market expectations.

Although the wheat market has theoretically entered a period of "green and yellow" recently, the market is facing many negative suppressions, and the fundamentals of strong supply and weak demand in the market continue. With the continuous decline in wheat prices and the approaching new wheat market cycle, some grain-holding traders have a reluctance to sell and resist prices, but their bullish mentality has weakened, and they are actively waiting for the opportunity to actively produce grain.

The sell-off of wheat reserves continued to increase

After the Qingming Festival, the reserve wheat at all levels continued to increase in volume, and large orders appeared frequently, often at the level of tens of thousands of tons, and the supply of spot wheat was sufficient. As the current milling enterprises have replenished part of the raw grain inventory, the willingness to participate in the auction has weakened, the market bidding is generally hot, the transaction rate and transaction price have declined compared with the pre-holiday, and the transaction of local reserve wheat is even more bleak. According to preliminary statistics, in the week of April 8 to 12, 900,000 tons of wheat were listed in the grain reserves, which was the largest amount of the year.

On April 8, China Grain Reserves Anhui Branch sold 44,818 tons of wheat in 2019 and 2020 at a competitive price, with a turnover rate of 12%, a floor price of 2720~2760 yuan/ton, a transaction price of 2720~2740 yuan/ton, and an average transaction price of 2733 yuan/ton. On April 9, China Grain Reserves Shandong Branch held a wheat auction sales transaction, planning to sell 76,288 tons of first- and second-class wheat in 2020 and 2021, with a transaction volume of 2,905 tons, a turnover rate of 4%, and a transaction price of 2,700~2,720 yuan/ton. On April 10, Shandong Yantai Municipal Grain and Oil Reserve sold 2,743.24 tons of first-class white wheat produced in Shandong in 2020, and the actual transaction was 1,362.05 tons, with a turnover rate of 49.65% and a transaction price of 2,680 yuan/ton. On April 11, China Grain Reserves Beijing Branch sold 59,510 tons of first- and second-class wheat from 2018 to 2021, and the actual transaction was 8,374 tons, with a turnover rate of 14% and a transaction price of 2,660~2,705 yuan/ton. On April 12, Henan Province's local reserve wheat rotation sales plan put 52,035 tons of wheat from 2019 to 2022, with a turnover of 5,400 tons, a turnover rate of 10%, a floor price of 2570~2750 yuan/ton, a transaction price of 2570~2690 yuan/ton, and an average transaction price of 2609 yuan/ton.

It is still difficult to significantly improve the end demand

According to the market, after the Qingming holiday, some downstream flour dealers concentrated replenishment, the market is mainly based on the consumption of inventory, milling enterprises are under pressure, and the operating rate has decreased slightly. At the same time, wheat prices have been declining recently, and the decline in the cost of raw grains has led to a decline in flour prices.

According to the institutional survey, in the week of April 8 to 12, the operating rates of small and medium-sized enterprises in Hebei, Shandong, Henan, Anhui and Jiangsu, the main flour producing areas, were 32.22%, 30.43%, 31.33%, 38.95% and 29.43%, respectively, and the average operating rate was 32.47%, down 0.61 percentage points from last week. The ex-factory price of special flour of milling enterprises in the main producing areas was 3220~3280 yuan/ton, down 40~50 yuan/ton compared with before the Qingming Festival.

Due to the decline in soybean meal prices, the deviation of corn market, and the loose inventory of corn and alternative grain sources in feed enterprises, the enthusiasm of enterprises to purchase bran is poor, and the difficulty of bran delivery is high, and the quotation is also weakly adjusted. At present, the ex-factory price of bran of milling enterprises in the main producing areas is 1410~1460 yuan/ton, down 10~40 yuan/ton compared with before the Qingming Festival.

Since March, the demand for flour and by-products in the main producing areas has shown a weak trend, with fewer orders from manufacturers and slow shipments, and prices have fallen, and the prices of flour and by-products have fallen to the lowest level in nearly three years. Due to the limited demand for wheat milling, manufacturers are cautious about the future market, and generally adopt a low inventory strategy and carry out rolling replenishment according to demand.

Recently, the price trend of corn has continued to be stable and declining. The surplus grain at the grassroots level in Northeast China has bottomed out, and the traders' shipping intentions are not high, and the prices are relatively stable. Corn prices continued to decline slightly due to relatively loose supply and insufficient demand follow-up in northern China. At present, the mainstream price of corn in Shandong is 2260~2440 yuan/ton, the price of wheat hovers at 2680~2780 yuan/ton, and the price difference between wheat and corn is 340~420 yuan/ton, which is still in a high position.

Pre-purchase prices for new season wheat declined

According to market feedback, the price of wheat in the wheat market has fallen under pressure under the pressure of high grain reserves at all levels. Some local enterprises have slightly lowered the sales floor price in some bidding sections, and the focus of the 2024 wheat transaction price for policy-reserve wheat bidding and procurement has been moving downward. Take Shandong as an example: on April 8, Shandong Qingdao Guoxin Grain Management Co., Ltd. bid to purchase 2,000 tons of non-rain wheat in 2024, all of which were sold, with a floor price of 2,680 yuan/ton, a transaction price of 2,645~2,650 yuan/ton, and an average transaction price of 2,647.5 yuan/ton, down 32.5 yuan/ton from the price on March 1. On April 9, Shandong Guoxin Warehousing and Logistics Co., Ltd. bid for the purchase of 3,000 tons of non-rain wheat in 2024, with a floor price of 2,660 yuan/ton, all of which were sold, down nearly 40 yuan/ton from mid-March. On April 10, Shandong Weifang Luogushan National Grain Reserve Co., Ltd. bid for the purchase of 3,000 tons of non-rain wheat in 2024, all of which were sold, with a reserve price of 2,680 yuan/ton and a transaction price of 2,650 yuan/ton, a discount of 30 yuan/ton.

Recently, the two-way purchase and sale of wheat in the central reserve in 2024 will be mostly 2640~2700 yuan/ton, and it will also decline to varying degrees. On April 11, the purchase price of wheat in 2024 was 2660~2680 yuan/ton, and 2690~2740 yuan/ton in mid-March, down 30~60 yuan/ton, and the purchase and sale price of wheat in 2024 was 2660 yuan/ton, and 2680~2740 yuan/ton in mid-March, down 20~80 yuan/ton.

Before the new wheat price is not expected to rise, it is not high

It has been less than two months since the new wheat was fully listed, and there is only about one month left for Hubei early wheat to be listed, the basic pattern of strong supply and weak demand in the wheat market is difficult to change, and the influencing factors are still mostly bearish, the overall confidence of the market is insufficient, and the bullish expectations for the future are not high. However, due to the mismatch between supply and demand in different regions and different time periods, wheat prices still do not rule out the opportunity for a phased rebound before the new year.

From the perspective of supply, as the new wheat harvest is getting closer and closer, the time left for the auction of old wheat is becoming more and more limited, and it is estimated that it is difficult to slow down the pace of rotation of policy reserve wheat in the future. At the same time, due to the continuous decline in wheat prices, the mentality of some grain-holding traders has changed, and the enthusiasm for shipment has increased, and the overall market supply will remain sufficient.

From the demand point of view, since March, the wheat market has continued to weaken, flour enterprises have reduced orders, goods are slow, flour and by-product prices have fallen, milling enterprises have generally maintained a low inventory level, wheat is mainly based on rigid demand replenishment, and the downstream market demand support is relatively weak.

From the perspective of new wheat production, the new season wheat in the main producing areas is in good condition, and in view of the reality of bumper harvest expectations, it may drive the new wheat to open and market at a low price. Previously, some institutions expected that the new wheat scale price or will hover at 2600 ~ 2700 yuan / ton, but with the weather is better, the opening scale price is expected to continue to decline, the current 2500 ~ 2600 yuan / ton mostly, low is expected to be 2400 ~ 2500 yuan / ton. From the perspective of the integration of new wheat in the later stage, the low expectation of new wheat opening scale will increase the price pressure of existing wheat stocks to a certain extent. (This article was originally published in the A03 edition of the Grain and Oil Market News on April 16, 2024)