Other sources: Wheat being harvested in Canada. The country is one of the largest exporters of wheat and could be one of the suppliers China turns to for the grain. — AP
BEIJING: 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 United States, 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 tonnes 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 United States.
Last year, total imports hit a record 9.96 million tonness as buyers swapped in wheat for other ingredients in animal feed, and Chinese citizens ate 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 tonnes, 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.
Ever mindful of ensuring food security for its one 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 tonnes 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 tonnes this year, according to official data. That’s the first decline in seven years. — Bloomberg
