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China maintains wheat floor price for fourth year running

China will maintain its minimum support price for wheat unchanged in 2017 at major wheat producing areas, to safeguard farmers' income, according to a statement released October 21 by the National Development and Reform Commission.

The Chinese government's minimum support price (for third-grade) wheat produced in 2017 will be set at Yuan 2,360/mt, or $348.61/mt, rolled over from 2016, and unchanged since 2014.

Chinese domestic wheat has been procured and stored by state grain companies under the government's minimum support price program since 2006.

The minimum support price is set after considering production costs, supply and demand, as well as domestic and international market price trend and overall industry development, sources said.

Sources said this year's announcement came later than the previous few years', typically announced by mid-October, sources said, leading to speculations on possible changes to the government policy, given recent changes in crop subsidies, such as with corn.

Moreover, domestic wheat pricing has been heard at an average of Yuan 900/mt, or $132.95/mt, more expensive than imported wheat, for the past year, taxing on domestic flour millers, since private millers are unable to import wheat themselves.

The Chinese government imposed an import quota system, allowing only 10% of the allocated import quota to private buyers, with the rest allocated to state buyers such as Sino Grain and Cofco.

The wheat import quota for 2017 has been set at around 9.64 million mt, unchanged from that for 2016. But the world's largest wheat producer typically imports only about 3 million mt/year.

Nevertheless, given that wheat is a staple food crop, with farmers' livehood and food security at stake, market sources expect any changes in price support for wheat to happen only gradually.

Meanwhile, planting for winter wheat is ongoing in China, with some sources expecting about 2%-3% reduction in acreage, as farmers are encouraged to diversify crop-planting, in line with the country's agricultural reforms objectives, sources added.

Winter wheat accounts for 90%-95% of China's total wheat output, with 70%-80% of the crop produced in five provinces located in the North China Plain: Henan, Shandong, Hebei, Anhui and Jiangsu.

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