Drought is temporarily impeded, and food prices tend to rise and fall

Since October 2010, the precipitation in Henan, Shanxi, Hebei, Shandong, Jiangsu, Anhui and Shaanxi has been reduced by 20% to 90% compared with the same period of the year. Soil loss has been severe and some winter wheat regions have experienced drought.

The industry believes that the current drought has little effect on the production of winter wheat, but if the drought continues to develop, it will cause the winter wheat to reduce production, thus pushing up the price of wheat, it is also likely to cause downstream prices of agricultural products to “hitch”, thus putting pressure on inflation.

Mo panic! The main force is still in the fall? The locked stock is likely to be saved! March stock market is likely to change dramatically? The hidden money behind the tussle! The impact on wheat production is not significant. According to statistics from the National Flood Control and Drought Relief Headquarters, as of January 17th, the country’s crop has been affected by 60.39 million mu of drought, including 8.98 million hectares of heavy drought. The country has 2.2 million people and 2.73 million head of livestock due to drought. Drinking water is difficult.

Ma Wenfeng, an analyst at Eastern Iger Agricultural Consultancy Co., Ltd., which has been paying constant attention to the drought, said that the impact of the current drought on winter wheat is not great, but if the drought continues to develop, if there is no effective rainfall in April, the impact will expand.

It is understood that at present, the drought-afflicted areas in the country are all concentrated in the Yellow River, Huaihe River, and Haimai River in the Haihe River Basin. The wheat production in the producing areas accounts for more than 80% of the country's total. The national winter wheat output is estimated at more than 90 million tons per year, accounting for more than 90% of all wheat production.

Ma Wenfeng said that at the time of overwintering, winter wheat has basically stopped growing, and its water demand is not large. At present, the drought has a limited impact on the growth mechanism of wheat. Some areas with sandy soil have dead seedlings. It is expected that the drought situation will have a 1% yield on winter wheat. About the impact, the output was reduced by one hundred thousand tons.

However, he said that for wheat production, the impact of continuous drought in winter and spring is even more serious. In mid-March, the wheat will begin to return to jointing. If there is no effective irrigation, production will decrease. “If the future drought continues until April, it is expected to reduce production. There will be an 8-10 million tons range, and there may be a large gap in the production and demand of wheat, the safety factor will be significantly reduced, and the price of wheat may rise sharply."

Other industry experts also pointed out that it is still too early to say that wheat will be significantly reduced due to drought and food prices will continue to climb.

Food prices are apt to rise and fall, although the impact on food production is limited, the current dry weather has had a certain impact on wheat prices.

In recent days, wheat futures prices have continued to rise due to worries about winter wheat and other crop production cuts. On January 24, Zhengzhou Commodity Exchange, the strong wheat 1109 contract rose 1.41%, returned above the 2800 point and closed at 2,805 yuan/ton. It is only one step away from the previous high point.

The spot price of wheat and the price of flour also show a strong stance. According to the China Grain Network, as of January 20, 2011, the average price of white wheat traded in the major grain and oil wholesale markets nationwide was 2,048 yuan/ton, which was slightly higher than the previous week; it was 5% higher than the same period of last year. China National Grain Reserves' national wheat purchase price index rose 0.32% on a week-to-week basis.

The industry believes that under the boost of weather and other factors, wheat prices are vulnerable to rise in the short term. However, the price rise is also expected to be subject to certain restrictions.

On the one hand, the overall supply of domestic wheat is sufficient, and domestic grain production has been increased for seven consecutive years. The State Reserve will also increase its efforts to put wheat into the market in the near future; at the same time, the country has also introduced measures to implement a directional pricing sales policy for a few flour enterprises in late December last year. It also suppresses the elasticity of the demand for flour in the current market and also increases the wait-and-see attitude of retailers.

With the development of drought, the concept of drought has become one of the focuses of the secondary market. According to industry analysis, in the severe drought, water conservancy facilities will receive market attention. The current state’s high regard for rural water conservancy construction will be beneficial to the future development of water conservancy listed companies; at the same time, the seed industry companies in the agricultural sector will also benefit from the drought. The increase in profits from the replanting of crops.

In addition, the steady increase in food prices will also become a trend for a period of time in the future, which will lead to a steady increase in the prices of some downstream agricultural products, and will also constitute long-term benefits for listed companies in the agricultural sector.

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