More grain reserves auctioned to stabilize prices

China's State Grain Administration has held its fourth auction of wheat this year, with 800,000 tons for sale in the two major wholesale markets, in a bid to slow price rises.
The market prices of major grain products, including rice, flour and cooking oil, have surged by six to 10 percent in cities like Beijing and Shanghai since November.
The National Development and Reform Commission and the State Grain Administration have jointly approved the auction of 3.8 million tons of the grain reserve since the end of November to ease demand.
Ding Shengjun, an expert with the administration, said market prices were still within reasonable limits.
"China's grain prices have been low for years due to state controls. However, this frustrated farmers' enthusiasm for growing grain," said Ding.
He said the central government allowed grain prices to fluctuate by the end of 2003, which had significantly improved harvests.
"These price hikes were not the result of a production shortage. The influence of the overseas grain markets and the country's minimum purchase prices for grain reserves are attributable to the constricted market supply," said Ding.
Figures from the administration show the government had purchased more than 41 million tons of wheat for state reserves in six main production bases, accounting for almost 40 percent of the country's estimated 103 million tons of annual wheat output.
China's grain output amounted to 469.5 billion kg in 2004, marking a turning point in a five-year downturn. The output in 2005 reached 484 billion kg. This year's harvest of summer grain reached 113.8 billion kg, seven percent up from last year.
The state's minimum purchase price has kept grain prices at a high level even after consecutive bumper harvests. The shortage in international markets, caused by droughts in the United States and Australia, also contributed to the rising prices, analysts said.
Thursday's auctions in Zhengzhou, capital of north China's Henan Province, and Hefei, capital of east China's Anhui Province, set a minimum price of 1,440 yuan (180 U.S. dollars) per ton, compared with the state purchase price of 1,380 to 1,440 yuan per ton. The highest bid was 1,650 yuan (206 U.S. dollars).
Food and oil prices have been steadily rising since August. The price of wheat had risen by about 10 percent to 1,700 yuan (212 U.S. dollars) per ton last month.