China Buys Up Australian and French Wheat
Trading sources have reported that China is looking to import a record amount of wheat in 2023 due to rain damage to its crops and concerns about the lack of rain in other exporting. The grain prices are currently low, which has prompted Beijing to dive into the market and buy more now.
Traders noted that China's considerable orders should help support global prices, which have dropped over 25 percent this year due to a supply surplus from Russia, a major exporter.
In October, China, which is the largest producer and consumer of wheat globally, bought around two million metric tons of Australian wheat for delivery in December and around 2.5 million metric tons of French wheat for shipment in December-March. These volumes are much bigger than usual for this time of year.
According to traders, China's imports this year will be close to 12 million tons and continue into 2024, beating the record of just under 10 million tons it imported in 2022
China reported that China had had issues with the quality of their crops this season, and Australia, the leading wheat exporter to China, is expected to have a reduced harvest.
This year, China reported the first fall in production in seven years due to heavy rainfall just before the harvest, even though more land was dedicated to it.
Estimates indicate that approximately 25 million tons, or 20% of China's harvest, suffered rain damage, with some still being usable but only for feeding animals or mixing with higher-quality imported wheat before milling into flour.
Muyuan Foods, the world's largest pig producer, has benefited from the rain-damaged wheat, as its abundance significantly helped them cut production costs.
Australia could take advantage of the quality deficiency that China is presently going through for high protein milling wheat as while output is expected to fall, the quality is better this season as the dry weather has resulted in higher protein content.
While rain-damaged wheat is one factor in China's recent purchases, the fact that prices are currently so low may be a more significant factor, allowing China to stock up and prepare for next year, where there are predicted weather risks in major exporting countries.
The import of Australian wheat has remained stable despite the recent political tensions between the two countries, which have been gradually easing in the past few months.
Beijing's purchases from Australia may force other countries that import from Australia, such as Indonesia and Japan, to look for other sources, such as North America and the Black Sea region. With the increased size of the U.S. spring wheat crop, China may be more likely to buy spring wheat from the U.S. and possibly Canada.