State media says wheat prices should say in “reasonable range”

High wheat prices have attracted increased attention from the government, with state media outlet Economic Daily saying it is necessary to ensure that wheat prices operate within a “reasonable range”.

Prices in many areas have exceeded 3400 yuan per ton in recent weeks. Economic Daily notes that part of this strength was due to Covid-related logistics disruptions. Shipment volumes have increased as those disruptions have lessened, but prices have only pulled back slightly.

Part of the rise in wheat prices is attributed to higher costs of production which is leading to farmers wanting higher prices. But as the Economic Daily piece notes, this is also squeezing flour producers and pressuring downstream industries.

Although wheat prices are higher, flour demand is still described and weak and slow. Some analysts attribute this to overcapacity in the flour milling industry. But China still has a situation where this year’s crop was described as a bumper crop with high quality but demand for downstream products like flour is weak.