China wheat woes lift prices of futures and shares

by Agrimoney.com

Wheat prices soared in China, supporting further rises in Western markets, as fears for mounted the country's winter wheat crop, with talk of efforts to step up agriculture lifting shares in Shanghai-listed farm groups.

Wheat for September, the best traded lot, surged the exchange limit in Zhenghou, closing up 7.0% at 3,051 yuan a tonne.

The jump on the exchange's first day back from lunar new year holidays followed a warning by the UN Food and Agriculture Organisation on Tuesday which crystallised background concerns about dry weather in wheat-growing areas of China, the world's top producer of the grain.

In fact, the area of seedlings affected by drought may be bigger than the 5.2m hectares, in five provinces, highlighted by the FAO, which warned crops faced a "critical situation" if rain was not forthcoming.

According to state radio, 6.7m hectares of wheat in eight provinces, which together account for more than 80% of the national harvest, is suffering drought.

About 24.3m hectares, an area the size of the UK, was sown altogether.

Shares surge 

On Shanghai's stock market, expectations of extra government support following the drought helped shares in many agriculture groups sidestep broader weakness from Tuesday's 0.25-point raise in Chinese interest rates.

Shares in Heilongjiang Agriculture, China's third-ranked listed food producer, closed 8.3%, while those in many seed groups also firmed. Stock in Gansu Dunghuang Seed climbed 5.4%, with Hefei Fengle gaining 4.9%.

Farm products retailer Gansu Yasheng Industrial soared 9.8%, a performance narrowly beaten by seed-to-marketing group Hunan Jinjian Cereals Industry, whose shares closed 10.0% higher.

China's government, which also directs $15bn at supporting farmers' incomes and subsidising fuel and fertilizer purchases, is looking at extra measures to support grain output, state radio said.

Western reaction 

In Western futures markets, China's woes helped support continued strength in wheat prices, although the country's limited role in international wheat markets, and apparently healthy inventories, capped bullish sentiment,

Chicago's March lot rose 1% to a fresh two-year high of $8.84 a bushel, with Paris's March lot keeping step to reach E279.00 a tonne.

London wheat for May gained 1.4% to £212.00 a ton

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