April 26, 2013

 

China driven to build up wheat stockpiles during April 2013

 

 

In almost a decade, China was driven to purchase wheat imports during April 2013, in order to increase state reserves.

 

The development was a result of deterioration in the country's massive but ageing state stockpiles, analysts said.

 

China's stocks were estimated to be sufficient to meet demand for six months. However, substandard storage facilities have damaged part of the crop, some of which dates back to 2010.

 

Traders said Beijing would continue to import and recover its depleted reserves whenever there was a slump in global prices. Still, volumes may not rise as high as 2004/05, when China bought about 10 million tonnes following a poor 2003 harvest.

 

State purchases were sealed in early April when prices at the Chicago Board of Trade fell to their lowest level in more than nine months. The price has since jumped 4.3% due to strong Chinese buying and weather concerns.

 

Sinograin, the state stockpiler, bought one million tonnes of US soft red winter wheat for the next marketing year, traders said. Some of the purchases were confirmed earlier by the U.S Department of Agriculture.

 

In 2012, it was reported that several Sinograin officials in Henan were sacked for taking bribes from private firms, which either falsified stock volumes or stored grain at substandard facilities in order to qualify for state subsidies.

 

The government also removed more than 900 private firms from the list of enterprises allowed to store wheat on behalf of the state.

 

Meanwhile, China's wheat imports for 2012 surged to an eight-year high of 3.69 million tonnes, consisting mainly of feed-grade wheat acquired to offset corn shortages.

 

Analysts estimate that the government still holds nearly 20 million tonnes of wheat from previous stockpiling, a comfortable level given the country's annual consumption of 115 million tonnes.

 

There is no expectation that the country's June wheat harvest will grow significantly, with crops crippled by a widespread drought. May's weather conditions will be a crucial determinant of the final yield. The ministry of agriculture stated that the drought has affected growth in Henan, Sichuan and Shaanxi.

 

Last year's wheat harvest stood at 120.58 million tonnes, the second highest on record, according to official data.