China’s Main Wheat Growing Region Escapes Drought, Wanda Says

Wheat crops in China’s Henan province, the country’s biggest grower, have escaped significant damage from drought so far, said Wanda Futures Co., the second- biggest brokerage on theDalian Commodity Exchange.

Dryness has been experienced in parts of the region including northern Henan, analyst Li Jingwei said from Zhengzhou, the province’s capital. Wheat in central Henan and other important growing-areas are developing well, he said.

About six million hectares of wheat in China’s top-growing areas, where the grain is sown in hilly regions without access to irrigation, are at the highest risk of losses to drought, the Ministry of Agriculture said today. Wheat futures in China jumped to a record this month on speculation of damage to crops from lack of rain.

In Henan, hilly regions account for about 4 percent to 5 percent of the province’s total output, Li said by phone. “The drought hasn’t had significant impact on Henan’s wheat crop overall,” he said.

China may plant a total 24.3 million hectares of wheat in 2010-2011, state-affiliated ChinaNational Grain & Oils Information Center forecast this month. Henan and neighboring Shandong province together accounted for 45 percent of the country’s total output of 112 million tons in the marketing year 2008-2009, the center’s data show.

‘Too Early’

Still, Li said it’s too early to draw a final conclusion because the crops haven’t entered the critical “greening and elongating” growth stages.

Recent gains in wheat futures prices partly reflect concerns about supplies of high-quality milling wheat, as some traders believe the country’s premium wheat may not be as abundant as the government has said, Li said.

“Speculators with plenty of capital see the drought as an opportunity for higher return,” he said.

On the Zhengzhou Commodity Exchange, strong-gluten wheat, a premium milling variety, fell as much as 0.7 percent to 2,803 yuan ($428) a ton and last traded at 2,819 yuan. The grain touched a record 2,858 yuan a ton on Jan. 26.

The spot price of wheat in Henan is 2,080 yuan a ton today, compared with 2,050 yuan a ton on Nov. 1, data by Shanghai JC Intelligence Co. show.

(Source: http://www.bloomberg.com/news/2011-01-28/china-s-main-wheat-growing-region-escapes-drought-wanda-says.html)