Wheat prices drop as sentiment shifts, but rice remains strong after holiday

Prices of middle and late-season rice continue to rise in central China following difficult growing conditions last year which led to tighter supplies.

Prices in Hubei continued to rise after the Chinese New Year holiday which is an unusually counter-seasonal trend. Over the past 6 months, prices have risen by 4.4% compared with just 0.6% for early-season rice.

Wheat prices have continued to move down with prices hitting their lowest level since November. Following a strong rally in October, prices have been stable but unable to push higher in the past three months. Market sentiment has turned more bearish which is leading to traders liquidating stocks to free up space ahead of the new-crop harvest as they expect the old-crop price downturn to continue.

This bearish sentiment has also affected prices for the smaller local wheat reserve auctions in the province. Wheat from the 2020 harvest saw average prices drop 72 yuan per ton over the past week. 2022 wheat saw prices drop 240 yuan per ton in the provincial auction compared to last week. The auctioned volume was much smaller than last week, and the sharp price drops could be the result of specific quality or location factors, but this steep drop has reinforced the bearish sentiment.