Posted on October, 13, 2023 at 06:04 am
China is scouring the globe for wheat, with annual imports on track to hit record levels, as buyers scoop up cheap supplies after heavy rains damaged the domestic crop.
Following a splurge on Australian wheat earlier in the year, large quantities have been booked this month from some of the other main exporters, including the US, Canada and France, according to traders, who declined to be identified discussing private business.
The buying spree comes after international wheat prices dropped to a three-year low at the end of September. Although that signals supplies are ample for now, China’s growing appetite adds an element of uncertainty to supply chains that have become increasingly vulnerable to war and protectionist trade policies.
“China’s wheat imports will be strong going forward, and for sure they will exceed the annual quota,” said Darin Friedrichs, co-founder of Sitonia Consulting Co. “It seems like China’s bought up all of the easily exported supplies from Australia and is now needing to go further afield.”
Beijing uses quotas to manage imports of staples like wheat. It allows 9.636 million tons a year of the grain at a 1% tariff, with 90% of the allocation going to government firms. Above that cap, the tariff rises to 65%, a level usually out of reach for private buyers but not for the state-owned giants.
For years, the quota was never used up. But that changed in 2020 as Beijing’s trade deal with the Trump administration boosted purchases from the US. Last year, total imports hit a record 9.96 million tons as buyers swapped in wheat for other ingredients in animal feed, and Chinese citizens eat more bread. China now vies with Egypt as the world’s top importer.
Overseas purchases in the first eight months of 2023 have already hit 9.56 million tons, with more than 60% sourced from Australia. Buyers are surveying the southern hemisphere nation’s upcoming harvest for future supplies, as well as watching crop conditions in alternative origins like Kazakhstan, the traders said.
Food Security
Ever mindful of ensuring food security for its 1 billion-plus population, Beijing is keen to build up its grain stockpiles, particularly against the backdrop of the war in Ukraine — another big exporter — and increasingly frequent bouts of extreme weather as the planet warms.
China’s recent buying activity is largely tied to the weather problems it experienced as this year’s crop approached harvest, said Arlan Suderman, chief commodities economist at StoneX Financial Inc. He estimated that persistent rains reduced the quality of 30 million to 40 million tons of wheat, leaving it suitable for livestock feed but not human consumption.
“That increased the need for China to buy higher-quality milling wheat from the world market, to blend with its own wheat to meet its goals for food quality,” Suderman said.
China’s summer wheat crop, which makes up the bulk of the harvest, fell 0.9% to 134.53 million tons this year, according to official data. That’s the first decline in seven years.
The Week’s Diary
(All times Beijing unless noted.)
Thursday, Oct. 12:
China to release September aggregate financing & money supply by Oct. 15
EU-China energy dialogue in Beijing, 14:30-18:00
Keynote speech by Kadri Simson, EU Commissioner for Energy
EU-China Energy Cooperation Platform releases report on net zero carbon infrastructure
China’s monthly CASDE crop supply-demand report
Friday, Oct. 13:
China inflation data for September, 09:30
China’s 1st batch of September trade data, including steel, aluminum & rare earth exports; steel, iron ore & copper imports; soybean, edible oil, rubber and meat & offal imports; oil, gas & coal imports; oil products imports & exports. ~11:00
China weekly iron ore port stockpiles
Shanghai exchange weekly commodities inventory, ~15:30
Saturday, Oct. 14
Chilean President Gabriel Boric’s first trip to China begins with events in Shenzhen
On the Wire
Russian President Vladimir Putin overplayed his hand by trying to use Gazprom PJSC to bring Europe to its knees, and now his efforts to bolster the state-controlled gas giant are at the mercy of China.
Chinese oil major Sinopec is planning to file a complaint against a key US gas exporter, joining at least five other customers that have said Venture Global LNG Inc. isn’t honoring its contracts.
Saudi Aramco is in talks to buy a 10% stake in a Chinese refining company, less than a month after starting similar discussions with another firm as it looks to tie up long-term crude oil supplies.
Source: Yahoo