Chinese flour mills bought wheat from France in June, a rare purchase that highlights China’s concerns about its low-quality harvest amid recent declines in global prices.
After buying 1.5 million metric tons (55 million bushels) of US wheat in May, Chinese importers are reportedly still looking for another 2 million to 3 million metric tons (73 to 110 mb) of wheat, possibly U.S. wheat.
“Recent wheat price decreases in the international market make wheat imports profitable in China. This is why China is looking for more wheat to import,” said Wenge Fu, an ag economics professor at China Agricultural University.
According to AgFax.com, USDA anticipates China will import 3.5 mmt in the 2013-14 marketing year. China’s wheat-importing program has increased steadily in recent years; in 2008-09 China only imported 480,000 tons.
Late rains damge Chinese crop
With 90% of the harvest complete, China’s wheat production is expected to total 120.6 mmt (4.4 billion bushels), slightly lower than the China National Grain and Oil Information Center’s forecast in May. Recent rains in the main production areas have caused wheat plants to lodge and delayed the harvest. Wheat grain quality has suffered as some of the grain germinated in the plant before it could be harvested.
“Wheat price keeps high after harvest this year,” Fu said, noting that the current elevator price is about US$10.27 per bushel, higher than the government purchase price at US$9.82 per bushel.
Wheat-corn price spread could boost feed use
China is also expected to consume 120 mmt of wheat in 2013-14, Fu said. Food use stays fairly steady, increasing incrementally each year, and is expected at 89 mmt. Price-sensitive feed usage tends to fluctuate more as the wheat-corn spread changes.
In 2010-11, corn prices were higher than wheat prices, and 26 mmt (955 mb) of wheat was used for feed. Feed consumption decreased to 20 mmt (734 mb) the following year as corn prices softened.
Feed consumption will be 16 million tons, Fu said, if wheat prices are higher than or similar corn prices.
As of June 24, Zhengzhou Futures Exchange September wheat contract cost the equivalent of US$10.64 per bushel, while the Dalian Futures Exchange had a September corn price of US$10.61 per bushel.
“If corn price increases, we will see more wheat be used as feed,” Fu said, adding that “if domestic wheat quality is not good, processors may import more high-quality wheat, and more domestic wheat will goes to the feed industry.”
In the first five months of 2013, China imported 1.177 mmt of wheat with an average price of US$10.80 per bushel, according to the China Ministry of Commerce.
“Australia, the U.S. and Canada have been the three largest exporters to China in the past years,” he said. “China imported 3.7 million tons wheat last year — 66% was from Australia, 17% from the US, and 11% from Canada,” said Fu.
So far in 2013, Canada earned the largest portion of China’s import budget. China purchased 19.2 mb from Canada, 12.1 mb from the U.S. and 11.6 mb from Australia.
