China’s wheat import plans face significant adjustments as the country delays or redirects around 600,000 metric tons of its wheat imports.
China’s Wheat Import Plans Hit a Roadblock
China, the world’s top buyer of wheat, has delayed or redirected around 600,000 metric tons of its wheat imports. According to two trade sources with direct knowledge of the matter, Chinese buyers are trying to resell these cargoes in Southeast Asia.
China is one of the world's largest consumers of wheat, accounting for over 130 million metric tons in 2020.
The country relies heavily on imports to meet its domestic demand, with major suppliers including Australia, Canada, and the European Union.
In recent years, China has increased its wheat import quota to accommodate growing demand from its large population.
According to data from the General Administration of Customs of China, wheat imports have risen steadily over the past decade, with a significant increase in 2019 due to droughts affecting domestic production.
The country is well-stocked after plentiful corn and wheat harvests. To support local prices that have fallen as a result, China does not want new wheat to arrive until as late as April. This decision may pressure benchmark Chicago wheat prices, which remain below $6 a bushel after falling to a four-year low of $5.14 in July.
Impact on Global Markets
China accounted for 6% of global wheat imports in the year to June 2024, according to U.S. Department of Agriculture data. The country’s lower intake may have significant implications for global markets, particularly benchmark Chicago wheat prices.
China has become a significant player in global wheat trade, with its imports increasing by over 50% in the past decade.
The country's growing demand for wheat is driven by its large population and expanding food processing industry.
China's wheat import impact is felt globally, with many countries including Australia, Canada, and Ukraine benefiting from increased exports to meet Chinese demand.
However, the surge in imports has also led to concerns over food security, with some experts warning of potential shortages and price volatility.
Australia and Canada are among the countries affected by China‘s decision. One source, a Singapore-based trader at an international company that sells U.S. and Australian wheat into Asia, said he had direct knowledge of four shipments carrying around 240,000 metric tons of wheat from Australia and Canada that Chinese buyers were trying to resell in Southeast Asia.
The trade relationship between Australia and Canada in the wheat sector is significant, with both countries being major exporters of wheat globally.
According to data from the Australian Bureau of Statistics, in 2020, Australia exported over 10 million metric tons of wheat to Canada, valued at approximately AUD 2.5 billion.
Similarly, Canadian wheat exports to Australia have also been substantial, with a total value of CAD 1.3 billion in 2019.
The partnership has been strengthened by trade agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Domestic Supplies and Prices
China‘s state-run COFCO is paying the costs of delaying shipments, including charges to hold back grain. The company will take any gain or loss from reselling grain. China wants to protect its farmers by reducing wheat imports for feed and flour. With a good corn crop, they have more than enough corn for feed.
The country’s state stockpiler Sinograin plans to add new stockpiling sites in northeast China to expand purchases of domestic corn harvested in 2024. This move is aimed at supporting local prices that have fallen due to ample domestic supplies.
Historical Context
Early last year, Chinese wheat importers cancelled or postponed about 1 million metric tons of Australian wheat cargoes as growing world stockpiles dragged down prices. However, in the first three months of 2024, China imported 1.7 million tons of wheat from Australia, down from 2.5 million tons in the same period a year earlier, and 923,000 tons from Canada, up from 783,000 tons a year earlier, according to Chinese trade data accessed using Trade Data Monitor.
