China's wheat imports skyrocket

25 Jan, 2005 10:00 PM

THERE has been a huge increase in wheat imports into China in the past year, with some reports indicating it took more than seven million tonnes in 2004.

This was in direct contrast to the past five to six years when annual wheat imports into China had been averaging about 1mt or less.

China was a net exporter of wheat in 2003, according to Asia Pulse.

The reports also indicated the General Administration of Customs showed China imported 6.61mt in the first 11 months of 2004 while US figures indicated more than 300,000t left the US for China in December.

A World Trade Organisation (WTO) agreement indicates China has a 9mt import quota for wheat, of which 90pc is held by state-owned trade companies.

It is expected that even if China reported a strong harvest for 2004, the output would not meet domestic demand because of a large reduction in wheat stocks.

The news of China's big rise in imports will provide a morale boost to Australian wheat growers, who have been hearing doom and gloom wheat price forecasts.

AWB state manager Paul Ryan said while the increase was a welcome development, world production would still be up 30-40mt this year.

"It is reasonably promising and a good development, but in the big picture, there is a lot of wheat around," he said.

"We have already sold a reasonable tonnage out of the 2003-04 pool to China and will be shipping more from this harvest."

He said China's stronger demand for wheat was due to an increasing population and growing economic development which had led to different land uses and a reduction in wheat plantings.

China had always imported some wheat to gain required quality but was moving to be a net importer of wheat and could take 10mt in a few years.

He said it was possible wheat farmers around the world had already reacted to lower wheat prices by planting less wheat and WA growers would probably be making decisions on their cropping programs in the next month or so.

Meanwhile Profarmer analyst Dennis Wise said that despite WA's larger than expected crop size, the national crop could struggle to reach 20mt, mainly due to reduced yield potential and quality problems in eastern Australia.

He said after 6mt went into the domestic market, only 13-14mt would end up in the pools, and with quality also an issue, AWB Ltd might have to ration wheat to premium markets.

Mr Wise said his assumptions were backed by AWB quickly closing pools after pool guaranteed access dates, except Victoria, and that it appeared not to be interested in lower value markets such as Egypt.

He said Argentina was supplying poorer quality wheat at $134-$135/t FOB into markets also supplied by Australia, which didn't look good for pool feed, GP or AUW prices.

Mr Wise said a smaller crop would be a bonus for AWB Ltd if it had hedged for a larger crop.

"The smaller crop looks like a plus to me," he said.

Mr Ryan said AWB always tried to maximise prices when deciding which markets to supply and that Argentina usually entered the market at this time of the year, often at its lower end.

He said Argentina had a different approach to marketing and usually sold straight into the trade which operated more on a volume basis than targeting specific markets.



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