2024-01-03 09:46:55
Chinese black box: the truth regarding China’s wheat harvest – and imports
Olaf Zinke, AGRARHEUTE*
© stock.adobe.com/zhang yongxin
At the end of May, Henan Province, the Chinese province that produces the most wheat (a quarter of total production), was subjected to heavy rains for six consecutive days. The “rotten rains” were the worst in ten years.
China announces a large wheat harvest. At the same time, imports are increasing sharply and wheat prices also remain very high. Massive rains during harvest apparently led to a very sharp drop in quality. This has consequences on the global market.
© Olaf Zinke
China announces near-record wheat harvest. Yet major growing regions were hit by torrential rains ahead of harvest.
China announces near-record wheat harvest. Yet major growing regions were hit by torrential rains ahead of harvest. But provincial governments apparently announce the harvest quantities that they are expected to produce – or that the plan calls for.
But quantity says nothing regarding quality and therefore regarding import needs. And this has clearly been felt in recent weeks. China recently purchased large quantities of wheat and barley from Europe – therefore from France. China is increasingly becoming a significant player in the global wheat trade – it will likely be the world’s largest international wheat importer in the 2023/24 marketing year, analysts say.
The main suppliers so far are Australia and France. Also last year, a record harvest and good harvest quality surprisingly did not lead to a decline in wheat prices, which are very high in international comparison.
The price of last harvest wheat was 435 US dollars (3,000 RMB) per tonne in June 2022 and exceeded 464 US dollars (3,200 RMB) per tonne in early 2023, reports the USDA office in Beijing.
At the same time, wheat prices are more than US$43 higher than corn prices, crowding out wheat from animal feed rations. In the first half of 2023, however, domestic wheat prices fell once more by USD 79 (RMB 550) per tonne.
Wheat quality: germination on the vine, powdery mildew and mold
© Olaf Zinke
China has the largest wheat reserves in the world. No one really knows what that quantity is. Last year the USDA estimated it at 139 million tonnes, which would be a little more than half!! global stocks.
At the end of May, Henan Province, the Chinese province that produces the most wheat (a quarter of total production), was subjected to uninterrupted heavy rains for six consecutive days.
The “lazy rains” were the worst in ten years, reports the Beijing office of the United States Department of Agriculture (USDA). This led to water stagnation, germination of standing wheat, powdery mildew and mold. Wet, flooded soils prevented harvests and a lack of drying space and facilities limited remedial action following the rains.
Rains in late May and early June affected a total of more than 30 percent of China’s new wheat crop in other high-producing provinces, leading to an unprecedented high percentage of germinated wheat, analysis shows from the USDA.
For crops in areas south of the Yellow River, the standing germination rate was above 50 percent. Due to the abundance of poor quality wheat, the need for import of quality wheat for food production is increasing.
Additionally, the USDA expects there to be greater substitution of corn for wheat in animal feed rations.
Import needs greater than expected
Wheat imports for the 2023/24 season were estimated in October by the USDA at “only” 11 million tonnes, almost 2 million tonnes less than the previous year. Most analysts now estimate that import requirements will be significantly higher. And current purchases confirm it.
Wheat imports from the People’s Republic of China for the 2022/23 fiscal year amounted to nearly 14 million tonnes, significantly exceeding the State Tariff Rate Quota (TRQ) of 9.636 million tonnes, which is part of the country’s commitment to join the World Trade Organization.
More than 40 percent of imported wheat recently came from Australia. Another important supplier of wheat is France (also for barley). Germany still does not have the right to deliver, because unlike France, there are no bilateral and phytosanitary agreements and contracts with Germany.
The majority of imported wheat is high quality and intended for flour production, and only a small percentage is intended for animal feed.
Half of the world’s stocks in China
China has the largest wheat reserves in the world. No one really knows what that quantity is. Last year, the USDA estimated it at 139 million tons – or a little more than half! of world wheat stocks.
But analysts expect wheat reserves will likely fall by 6 million tonnes this year. This can be explained in particular by the high prices of wheat on the domestic market. And the persistence of high consumption.
Many observers assume that authorities will work to replenish state stocks as quickly as possible, as security of grain supplies remains a top priority. This is why the authorities of the People’s Republic of China suspended wheat auctions for the 2022/23 financial year from the end of April, a month earlier than the previous year.
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* Olaf Zinke works for AGRARHEUTE as cross-media editor for operations and markets. He has analyzed national and international agricultural and commodity markets for three decades and has worked in this capacity for various institutions.
Source: Black Box China: The truth regarding China’s grain harvest – and imports | agrarheute.com
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