China moves to protect grain reserves, announces early suspension of wheat auctions

CHINA — China has announced an earlier than expected suspension to weekly wheat auctions from state reserves in an effort to preserve what is left amid rising global shortage due to the war in Ukraine.

China suspended sales of wheat from its reserves last week and did not release any auction results on Monday (Apr 25).

Beijing had been releasing only around 500,000 tons of wheat from the reserves in weekly auctions recently, compared with 4 million tons at some auctions in 2021.

China is the world’s largest producer of wheat at over 136 million tons annually, but it’s 1.4 billion strong population also consumes about 148 million tons.

“A lot of the wheat was consumed last year. You can’t keep using that much every year. Inventories were not plentiful either,” said a source with a state institution.

Beijing had been releasing only around 500,000 tons of wheat from the reserves in weekly auctions recently, compared with 4 million tons at some auctions in 2021.

Auctions last year did not stop until May 10 as Chinese feed producers snapped up the grain to offset record prices for corn, and more than 27 million tons of wheat was sold from the reserves from the beginning of 2021 until the sale was halted before the new harvest.

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This year’s early suspension of the auctions drove grain prices higher due to the existing tight global supply exacerbated by Russia’s invasion of Ukraine, who jointly account for about 29% of the world’s exports.

The shutdown of Ukrainian ports until Russia ceases its aggression on their territory has caused wheat prices to surge to 14-year highs.

Wheat prices in Shandong province, a main producer, hit record high levels at 3,380 yuan (US$515.16) per ton last week, before edging down slightly.

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As food prices rise both locally and internationally and war continues to rage between two of the world’s biggest grain suppliers, Beijing is intent on securing an adequate food supply for its massive population.

Concern on food security starts from the country’s highest political office with Chinese President Xi Jinping making grain self-sufficiency a priority as part of the country’s most recent five-year plan.

After braving what has been termed by officials the worst crop conditions in history, consisting of extreme weather caused by rising global temperatures and compounded by geopolitical turmoil and the pandemic, the market is closely watching China’s new wheat crop.

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