Storms Send Chinese on Wheat-Buying Spree
Rainstorms in China have sent Chinese traders on a global wheat-buying spree, providing support to global wheat prices at a time when plentiful harvests in the US are driving prices down.
China is on track to import its highest volumes of wheat in nine years during the current crop year, which began on June 1, according to forecasts from the US Department of Agriculture.
Chinese wheat futures prices have been hovering near historic highs for most of this year because of tight supplies and high demand. On Tuesday the September contract for hard gluten wheat on the Zhengzhou Commodity Exchange closed at Rmb2,685 ($438) per tonne, up Rmb5.
China's domestic wheat crop is projected to fall 2-5 percent this year compared to last year because heavy rain has damaged crops, according to analysts.
The Chinese government has been trying to cool rising wheat prices by halting its domestic wheat stockpiling program, but so far this has had little effect.
The USDA revealed on Monday that Chinese buyers had booked 840,000 tonnes of soft red winter wheat, an unusually large purchase. The department attaché in Beijing recently raised its forecast for China's wheat imports to 4 million tonnes this crop year, and cut its forecast for Chinese wheat production because of the poor weather.
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"Wheat prices have already risen a lot [in China], and China's imports are usually dictated by the price differential between imports and domestic wheat," said Ma Wenfeng, crop analyst at Beijing Orient Agribusiness. He expects China's wheat imports to rise to 3.8 million tonnes this year, an increase of 30 percent from last year.
"Further price increases are a certainty," he adds.
Beijing tries to maintain self-sufficiency in key grains, including wheat, but the policy has been increasingly difficult to achieve as Chinese diets include more meat and as cities encroach on arable land.
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The changing dynamics of China's food industry have prompted record purchases of cereals over the past year, and sparked increasing Chinese investment in food producers overseas.
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Casey Chumrau of US Wheat Associates, an export promotion body in Washington, said: "It's definitely a market we've been watching and a market that we are focused on in the next decade".
The US competes with other wheat exporters, including Australia and France, for sales to China.
Additional reporting by Li Wan in Beijing