SunSirs: Wheat Prices See Year-End Rally: Limited Upside Expected

Recently, some flour mills raised purchase prices due to low inventory levels, triggering a temporary surge in wheat prices. However, the market faces constraints such as cautious sentiment and weak downstream demand. Can this price increase sustain momentum? What lies ahead for the wheat market?

Wheat Prices Begin Uptrend

From December 22 to 26, domestic wheat prices halted their decline and rebounded. The recent price increase has expanded in scope, primarily concentrated in major producing regions such as Henan, Hebei, and Shandong. The main reason lies in the continuous downward pressure on wheat prices in the previous period, which squeezed profit margins in the trading sector and correspondingly reduced grain supplies in the market. After a period of inventory digestion, flour processing enterprises have developed a phased restocking demand, jointly driving up wheat purchase prices.

As of December 26, the average purchase price for common wheat at flour mills in major producing regions nationwide stood at CNY1.262 per jin, marking a weekly increase of CNY0.002 per jin. Specifically: - Henan: 1.266–1.274 RMB/jin - Hebei: 1.242–1.258 RMB/jin - Shandong: 1.245–1.274 RMB/jin - Jiangsu: 1.252–1.268 RMB/jin - Anhui: 1.25–1.268 RMB/jin - Shaanxi: 1.285–1.95 RMB/jin

Reserve Sales Show Weak Performance

From December 22 to 26, local policy grain rotations at all levels were limited, with moderate market transactions providing only marginal support to wheat supplies. A new rotation cycle will commence after the New Year holiday. Statistics indicate that approximately 207,000 tons of local reserve grain were sold nationwide, achieving a 47% transaction rate at an average price of 2,481 RMB/ton—a 52 RMB/ton increase from the previous week. Local reserve grain purchases totaled about 27,000 tons, with a 92% transaction rate and an average price of 2,575 RMB/ton—a 168 RMB/ton decrease from the previous week.

Meanwhile, both sales and purchases of wheat from central reserves remained at extremely low levels. Sales transactions were scarce, while purchases achieved a 100% success rate. Statistics show that on December 22, the Xi'an branch planned to sell 1,309 tons of old wheat but recorded zero transactions. On the 23rd, the Beijing branch planned to sell 3,011 tons of wheat, with only 5 tons actually sold at no premium. On the procurement side, the Beijing Branch planned to purchase 1,200 tons on December 23, with all transactions completed at the base price of 2,485 RMB/ton. On December 24, the Heilongjiang Branch planned to purchase 4,274 tons of new wheat, with all transactions completed at the base price of 2,550 RMB/ton.

Wheat Processing Profit Margins Shrink

As of December 26, the quoted price for 60-grade flour in major producing areas ranged from 2,680 to 2,790 RMB/ton, with some regions in Henan, Anhui, Jiangsu, and Shandong seeing declines of approximately 10 RMB/ton. The quoted price for 30-grade flour ranged from 2,800 to 2,910 RMB/ton, down 10 to 20 RMB/ton week-on-week. Despite December's mid-to-late period typically marking peak wheat trading season, weak terminal flour demand persisted. Flour mills maintained low operating rates, with flour prices continuing modest declines that constrained wheat price movements.

As of December 26, the average operating rate for small and medium-sized flour mills in major producing regions stood at 32%, down approximately 1 percentage point from the previous week. while large mills maintained relatively stable operation rates between 60% and 75%. This week, bran prices in major producing regions quoted between RMB1,770 and 1,850 per ton, down RMB10 to 30 per ton week-on-week. With both flour and bran prices declining, milling profits saw a slight contraction.

International Wheat Prices Rebound After Decline

From December 22 to 26, the CBOT wheat futures contract rebounded after a decline. The U.S. market closed on December 25 for Christmas. On December 24, the March 2024 U.S. wheat contract closed at 522.5 cents per bushel, up 13 cents from the previous week. This was primarily driven by market concerns over tensions in the Black Sea and coastal regions of Venezuela.

On one hand, major Southern Hemisphere wheat producers like Argentina and Australia are experiencing bumper harvests. Production forecasts for key producers including Russia, the EU, Argentina, and Canada have been further revised upward, intensifying global supply pressures and heating up export market competition. This has impacted U.S. wheat, which lacks a price advantage. By the week ending December 19, U.S. wheat futures had declined for six consecutive weeks.

On the other hand, escalating geopolitical tensions in the Black Sea and Venezuelan coastal regions have reignited market concerns over supply chain disruptions. Concurrently, robust weekly export sales data for the 2025/2026 U.S. wheat crop has spurred increased short covering activity. Consequently, wheat futures prices have now rebounded for five consecutive trading days.

Wheat Prices See Year-End Rally: Limited Upside Expected

Recently, some flour mills raised purchase prices due to low inventory levels, triggering a temporary surge in wheat prices. However, the market faces constraints such as cautious sentiment and weak downstream demand. Can this price increase sustain momentum? What lies ahead for the wheat market?

Wheat Prices Begin Uptrend

From December 22 to 26, domestic wheat prices halted their decline and rebounded. The recent price increase has expanded in scope, primarily concentrated in major producing regions such as Henan, Hebei, and Shandong. The main reason lies in the continuous downward pressure on wheat prices in the previous period, which squeezed profit margins in the trading sector and correspondingly reduced grain supplies in the market. After a period of inventory digestion, flour processing enterprises have developed a phased restocking demand, jointly driving up wheat purchase prices.

As of December 26, the average purchase price for common wheat at flour mills in major producing regions nationwide stood at CNY 1.262 per jin, marking a weekly increase of CNY 0.002  per jin. Specifically: - Henan: 1.266–1.274 RMB/jin - Hebei: 1.242–1.258 RMB/jin - Shandong: 1.245–1.274 RMB/jin - Jiangsu: 1.252–1.268 RMB/jin - Anhui: 1.25–1.268 RMB/jin - Shaanxi: 1.285–1.95 RMB/jin

Reserve Sales Show Weak Performance

From December 22 to 26, local policy grain rotations at all levels were limited, with moderate market transactions providing only marginal support to wheat supplies. A new rotation cycle will commence after the New Year holiday. Statistics indicate that approximately 207,000 tons of local reserve grain were sold nationwide, achieving a 47% transaction rate at an average price of 2,481 RMB/ton—a 52 RMB/ton increase from the previous week. Local reserve grain purchases totaled about 27,000 tons, with a 92% transaction rate and an average price of 2,575 RMB/ton—a 168 RMB/ton decrease from the previous week.

Meanwhile, both sales and purchases of wheat from central reserves remained at extremely low levels. Sales transactions were scarce, while purchases achieved a 100% success rate. Statistics show that on December 22, the Xi'an branch planned to sell 1,309 tons of old wheat but recorded zero transactions. On the 23rd, the Beijing branch planned to sell 3,011 tons of wheat, with only 5 tons actually sold at no premium. On the procurement side, the Beijing Branch planned to purchase 1,200 tons on December 23, with all transactions completed at the base price of 2,485 RMB/ton. On December 24, the Heilongjiang Branch planned to purchase 4,274 tons of new wheat, with all transactions completed at the base price of 2,550 RMB/ton.

Wheat Processing Profit Margins Shrink

As of December 26, the quoted price for 60-grade flour in major producing areas ranged from 2,680 to 2,790 RMB/ton, with some regions in Henan, Anhui, Jiangsu, and Shandong seeing declines of approximately 10 RMB/ton. The quoted price for 30-grade flour ranged from 2,800 to 2,910 RMB/ton, down 10 to 20 RMB/ton week-on-week. Despite December's mid-to-late period typically marking peak wheat trading season, weak terminal flour demand persisted. Flour mills maintained low operating rates, with flour prices continuing modest declines that constrained wheat price movements.

As of December 26, the average operating rate for small and medium-sized flour mills in major producing regions stood at 32%, down approximately 1 percentage point from the previous week. while large mills maintained relatively stable operation rates between 60% and 75%. This week, bran prices in major producing regions quoted between 1,770 and CNY 1,850 per ton, down 10 to CNY 30 per ton week-on-week. With both flour and bran prices declining, milling profits saw a slight contraction.

International wheat prices halted their decline and rebounded

Expectations for wheat prices to maintain narrow fluctuations

Bullish Factors: First, limited quantities of central and local government reserve wheat are being released, with low market transaction rates. This weakens the supply supplement effect, providing bottom support for wheat prices. Second, some flour mills have depleted inventories and face restocking needs, proactively raising wheat purchase prices. Third, this year's winter wheat saw significant late planting, with poor growth in some ungerminated fields. Some market participants maintain long-term bullish expectations.

Bearish Factors: Firstly, as the New Year approaches, some grain traders are increasing wheat shipments to recover capital. Certain traders believe near-term price upside is limited and are selling at higher levels to lock in profits, boosting market activity. Second, downstream flour demand remains subdued, with pre-holiday consumption showing weak seasonal patterns. Flour prices in Henan, Shandong, Anhui, and other regions have continued to decline recently, while milling enterprises' operating rates have further decreased slightly, providing insufficient support for sustained wheat price increases. Third, intense competition in the flour processing sector, coupled with recent declines in flour and bran prices, has narrowed processing margins, reducing enterprises' willingness to purchase wheat at elevated prices.

Comprehensive analysis indicates that while wheat prices have entered an upward trend driven by flour mills' restocking demand, downstream consumption remains subdued, limiting price support. The current rally is expected to be limited in scope. Future attention should focus on the pace of wheat supply increases and flour market dynamics.

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