Special analyst Zhang Rongsheng
The author believes that flour consumption has entered the traditional off-season, and it is difficult for downstream demand to improve significantly, while the new wheat harvest is expected to be strong, the policy wheat auction continues, and the supply of old grain is abundant.
Compared with the continuous decline in wheat prices in the previous period, the decline has slowed down in recent days, and the signs of weakness and stabilization are obvious, and some low-inventory enterprises have also slightly raised their purchase prices. At the same time, the trading situation of policy wheat has also improved, and the short-term market panic has also eased. Monitoring shows that the current price of the national standard second-class new Pumai in the main producing areas is 2680~2720 yuan/ton, down 20 yuan/ton week-on-week.
Wheat quotations in producing areas were weak and stabilized
According to the market, as the center of gravity of wheat prices continues to move downward, the market sentiment has been differentiated, the surplus grain at the grassroots level has bottomed out, the channel inventory has been basically depleted, and some traders have a certain reluctance to sell. The amount of policy-related wheat has shrunk, the auction transaction situation in some areas has improved, the market supply pressure has been reduced, and the overall wheat price in the main producing areas has stabilized, with slight fluctuations in some areas.
At present, the price of Xinpumai net grain in milling enterprises is 1.335~1.355 yuan/jin in Handan, Hebei, 1.325~1.37 yuan/jin in Heze, Shandong, 1.355~1.36 yuan/jin in Zhoukou, Henan, 1.35~1.37 yuan/jin in Xuzhou, Jiangsu, 1.35~1.355 yuan/jin, and the price in some areas fell 0.005~0.015 yuan/jin week-on-week.
According to the analysis, the reasons for the weak stabilization of wheat prices again: first, the grassroots surplus grain bottomed out, and the channel inventory was further consumed, due to the low price of wheat, the cost of wheat in some channel stocks was higher, and the mentality of reluctance to sell at a high price became stronger; second, the rotation of wheat from the grain reserve has slowed down, and the risk of selling pressure in the market has been reduced; third, the raw material inventory of flour enterprises is low, and the May Day is approaching, and some milling enterprises have a certain need to replenish the operation, which has a certain support for the phased market.
Market participants believe that the current milling enterprises mainly use auction grain sources, the amount of surplus grain at the grassroots level is small, and the reserve auction wheat at all levels is enough to meet the processing needs of milling enterprises. In the short term, the pressure on the supply side of the wheat market still exists, the wait-and-see atmosphere of milling enterprises is still strong, and the recovery of wheat prices is weak. However, under the expectation of a decrease in grassroots grain sources and a reduction in policy wheat sales, the market may still have a chance to rebound, but time and space will be limited.
Reserve rotation has slowed down
It is understood that the rotation sales of wheat from the central reserve have shrunk significantly in recent days, and the pressure on the supply of grain sources in the market has been reduced. Although most of the transactions were still made at the reserve price, the transaction rate improved. According to preliminary statistics, last week (April 15-19), a total of 660,365 tons of wheat from the central reserve were auctioned, a decrease of nearly three percent from the previous week, and 352,840 tons were traded, with a turnover rate of 53.43%.
On April 15, China Grain Storage Henan Branch sold 59,772 tons of wheat in 2020 and 2021 at a competitive price, with a turnover of 37,667 tons, a turnover rate of 56.33%, a transaction price of 2,680~2,730 yuan/ton, and an average transaction price of 2,700 yuan/ton. On April 16, China Grain Reserves Xi'an Branch sold 19,240 tons of wheat in 2020 and 2021 at a competitive price, with a turnover of 13,156 tons, a turnover rate of 68%, a transaction price of 2,700~2,725 yuan/ton, and an average transaction price of 2,718 yuan/ton. On April 17, Henan Province's local reserve wheat rotation sales plan put 37,301 tons of wheat from 2019 to 2022, with a turnover of 11,033 tons, a turnover rate of 30%, a floor price of 2552~2680 yuan/ton, a transaction price of 2575~2680 yuan/ton, and an average transaction price of 2617 yuan/ton. On April 18, China Grain Reserves Shandong Branch sold 44,923 tons of first-class and second-class wheat from 2020 to 2022, with an actual transaction of 27,934 tons, a turnover rate of 62%, and a transaction price of 2,660~2,705 yuan/ton. On April 19, China Grain Reserves Beijing Branch sold 49,847 tons of wheat from 2018 to 2021 at auction, with a turnover of 9,268 tons, a turnover rate of 18.59%, a transaction price of 2,630~2,660 yuan/ton, and an average transaction price of 2,643.93 yuan/ton, down 7 yuan/ton from the average transaction price on April 16 in the previous period.
It is also understood that the auction turnover rate of temporary storage wheat in Xinjiang increased last week, but the average price fell sharply. On April 17, Xinjiang put 20,447 tons of temporary storage wheat from 2015 to 2017, with a turnover of 18,671 tons, a turnover rate of 91.31%, an increase of 37 percentage points week-on-week, and an average transaction price of 2,341 yuan/ton, down 170 yuan/ton.
Weak end-consumer demand continues
At present, flour consumption is in the off-season, the demand is weak, flour dealers are cautious in stocking, and the cost of ordinary wheat has fluctuated downward in the near future, driving the price of flour to run weakly. The ex-factory price of special flour of milling enterprises in the main producing areas was 3160~3200 yuan/ton, down 80 yuan/ton week-on-week. In the near future, the demand of the breeding industry is general, and the feed enterprises are mainly based on rigid procurement, and the purchase and sales of the bran market are stable, and the price fluctuates little. At present, the ex-factory price of bran of milling enterprises in the main producing areas is 1410~1450 yuan/ton, down 10 yuan/ton week-on-week.
Due to the pressure on the downstream products of the milling industry, the profits of enterprises are poor, and manufacturers mostly maintain daily operation. In the case of a bearish outlook and no worries about grain sources, wheat is basically picked at any time by milling enterprises, and the desire to increase raw material inventories is not high.
Since April, the domestic corn market as a whole has been running weakly, the price supported by policy purchases in Northeast China has been relatively stable, and the price in North China is still under downward pressure due to the surplus grain at the grassroots level. At present, the price difference between wheat and corn in North China is between 360~400 yuan/ton, and feed enterprises have basically stopped purchasing and feeding wheat.
The number of pre-purchases in the bidding of Xinmai increased
In order to reduce market risks, the proportion of two-way transactions between purchase and sale has increased significantly year-on-year in the rotation sales of wheat reserves at all levels this year, and the turnover rate is relatively high. To a certain extent, the two-way transaction of purchases and sales may reflect the market's expectations for the price of wheat in the new season.
On April 16, the two-way planned quantity of wheat purchase and sale of China Grain Storage Henan Branch was 32,137 tons, and the actual transaction was 13,593 tons, with a turnover rate of 42%; the sales transaction price of old wheat was 2,720 yuan/ton, and the transaction price of new wheat pre-purchase was 2,660 yuan/ton. On the same day, the two-way planned quantity of wheat purchase and sale of Hubei Branch was 5,898 tons, and the actual transaction was 2,642 tons, with a turnover rate of 45%, the sales transaction price of old wheat was 2,710 yuan/ton, and the pre-purchase transaction price of new wheat was 2,690 yuan/ton.
On April 19, the two-way planned quantity of wheat purchase and sale of China Grain Storage Shandong Branch was 25,420 tons, all of which were sold, the sales transaction price of old wheat was 2690~2730 yuan/ton, and the pre-purchase transaction price of new wheat was 2660~2680 yuan/ton. On the same day, the two-way planned quantity of wheat purchase and sale of Anhui Branch was 17,453 tons, and the actual transaction was 16,453 tons, with a turnover rate of 94%, the sales transaction price of old wheat was 2,640~2,680 yuan/ton, and the transaction price of new wheat pre-purchase was 2,600~2,630 yuan/ton.
Recently, the one-way procurement of new wheat at all levels in 2024 has also further increased. According to statistics, since April, Shandong Land Reserve has tendered for the purchase of 60,500 tons of new wheat in 2024, and 44,000 tons have been sold, with a turnover rate of 73%. It is reported that at present, in addition to Shandong, Hebei and Jiangsu have also begun to purchase new wheat in addition to Shandong.
On April 18, Jiangsu Binhai County Grain Material Reserve Co., Ltd. bid for the purchase of 12,691 tons of mixed wheat in 2024, all of which were sold, with a floor price of 2,660 yuan/ton, a transaction price of 2,600~2,620 yuan/ton, and an average transaction price of 2,611 yuan/ton.
On April 19, Shandong Military Grain Reserve Co., Ltd. of Luliang Group bid for the purchase of 2131.72 tons of non-dried wheat produced after rain in 2024, with a reserve price of 2660 yuan/ton, and all transactions were sold. On the same day, Hebei Bailiang Group Co., Ltd. bid for the purchase of 4,020 tons of second-class hard white wheat in 2024, all of which were sold, with a floor price of 2,690 yuan/ton, a transaction price of 2,635~2,640 yuan/ton, and an average transaction price of 2,638 yuan/ton.
The upward momentum of wheat prices in the market outlook is insufficient
According to the agricultural dispatch of the Ministry of Agriculture and Rural Affairs, the area of winter wheat this year has increased steadily and slightly, and the growth is better than that of the same period last year and normal year. On April 18, domestic remote sensing monitoring showed that the proportion of first- and second-class seedlings in the main winter-producing provinces was 95.3%, and the proportion of first-class seedlings in the five provinces of Hebei, Shandong, Henan, Anhui and Shaanxi exceeded 60%. In the absence of adverse weather conditions, a strong harvest is expected, adding pressure to the already sluggish wheat market.
There is still more than a month to go on the market of new wheat, and the current wheat purchase price of milling enterprises in the main producing areas is 1.32~1.385 yuan/catty. Although wheat prices have shown signs of weakness and stabilization recently, it is still difficult to find a positive drive for the upward trend in the market outlook, and the upward momentum of wheat prices is insufficient.
On the one hand, as the new wheat market is getting closer and closer, the time left for wheat production in 2023 is getting shorter and shorter, and wheat reserves at all levels will continue to be rotated out, and some traders who still have grain stocks will also sell their inventories at high stops. According to customs data, the mainland imported 1.78 million tons of wheat in March, an increase of 34.2 percent year-on-year, and a total of 4.29 million tons of wheat were imported from January to March, a year-on-year decrease of 1.4 percent.
On the other hand, the lack of good demand follow-up, flour consumption is in the off-season, the downstream is more difficult, the bran market is under pressure, and the enterprises are mainly based on inventory consumption, and the mentality of replenishment is not strong. On the whole, under the realistic background of strong supply and weak demand in the wheat market, it is expected that wheat prices will still be weak and volatile before the new market, and the possibility of sharp rises and falls is not large. It is recommended that all market players adapt to the situation, seize the opportunity, purchase and sell rationally, and avoid risks. (This article was originally published in the A03 edition of the Grain and Oil Market News on April 23, 2024)