Despite a noticeable increase in policy-driven releases after the New Year, wheat prices maintained an overall upward trend throughout January. Mainstream purchase prices at flour mills in producing regions ranged from CNY1.26 to 1.285 per jin. Market sentiment has generally improved, though pre-holiday flour consumption remains relatively sluggish. Many small and medium-sized flour mills have shown limited enthusiasm for wheat procurement, and traders widely report subdued wheat sales activity. As the pre-holiday purchasing window narrows, can wheat prices continue to climb in February? When should traders holding wheat inventories consider selling?

Farmers Hold Back, Flour Mills Raise Prices

Recent wheat supply from farmers has been uneven. On one hand, farmers' remaining grain stocks are running low, limiting local supply. On the other hand, despite flour mills gradually raising purchase prices, many traders struggle to sell their inventory at profitable prices. Their earlier procurement costs were high, making them reluctant to sell at a loss. While many flour mills have been relatively passive in adjusting prices due to low operating rates, recent robust transaction prices for reserve wheat auctions—including those by the China State Grain Reserves Corporation—have pushed the actual arrival prices of auctioned grain above market rates. Consequently, mills have found it difficult to suppress purchase prices. Recently, several flour mills in Shaanxi have raised their wheat purchase prices above CNY 1.3 per jin.

Increased State-Supported Sales Accelerate Pace

Results of the January 28th competitive bidding for state-reserved wheat (minimum purchase price wheat): 200,797 tons planned for release, with 155,720 tons actually sold. The overall transaction rate was 77.55%, with the highest price at 2,430 RMB/ton and the lowest at 2,320 RMB/ton. Among these: - Mixed wheat: 154,323 tons, 83.26% transaction rate, average transaction price 2,361.54 RMB/ton; White wheat: 1,397 tons, transaction rate 9.05%, average transaction price 2,360 RMB/ton. According to the afternoon announcement, 300,000 tons of wheat from the 2017-2020 harvests will be auctioned on February 4, 2026, marking a 100,000-ton increase from the previous week and accelerating the release pace. Participation remains limited to flour processing enterprises. Additionally, this month's four minimum purchase price wheat auctions achieved a combined transaction rate exceeding 70%. Among the 560,000 tons of old grain sold, at least 460,000 tons were 2017 wheat.

Strong Transactions Support Prices

This week saw robust transactions across all levels of reserves, with many achieving premium prices, providing some support for short-term wheat prices. January 28th China Grain Reserves Corporation Beijing Branch Wheat Trading Results: - Planned sale of 40,017 tons of 2021/22 wheat: Actual sale of 35,287 tons (88% success rate) - Starting average price: ¥2,485/ton - Final average price: ¥2,492/ton (¥7 premium) - Additional purchase of 2025/26 wheat at ¥2,470/ton January 30 Wheat Bid-Offer Trading Results from CNGRC Henan Branch: Planned sales of 86,230 tons of wheat from 2021, 2022, and 2023 harvests; actual sales of 74,619 tons (87% success rate). Average starting bid: ¥2,500/ton; average transaction price: ¥2,501/ton (¥1 premium). Additionally procured 2026 harvest wheat at ¥2,470/ton. January 30 wheat purchase and sale results from CNGRC Beijing Branch: Planned sales of 80,793 tons of wheat from 2021 and 2022 harvests, with 72,059 tons actually traded (89% success rate). Average starting bid: ¥2,487/ton; average transaction price: ¥2,492/ton; premium: ¥5/ton. Additionally purchased wheat from 2026 harvest at ¥2,472/ton.

In summary, wheat prices may fluctuate with a slight upward trend in the short term. Although corn prices in North China have shown a modest recovery recently, the price differential between corn and wheat remains significant, limiting wheat's feed demand. However, driven by rising costs, grassroots players are adopting a wait-and-see approach. Flour mills with low raw grain inventories have no choice but to moderately raise purchase prices. Yet, flour prices are unlikely to see significant improvement before the Spring Festival, and sustained price hikes by flour mills appear improbable. It is advisable to flexibly adjust sales plans based on individual inventory costs and capital risks. Post-holiday policy releases are expected to expand further.

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