May 20, 2004

China Wheat Imports Could Rise To 10 Million MT In 2004 Or 2005

China's wheat imports could spike as high as 10 million metric tons in 2004 or 2005 to meet the nation's production shortfalls, the U.S. Department of Agriculture said in a special report.
 
If consumption estimates are accurate, and production falls significantly below consumption, China will need to import wheat to fill the gap, the USDA said in a report titled "China's Wheat Economy: Current Trends and Prospects for Imports."
 
Beijing's secretive grain stocks levels and the "still somewhat cumbersome functioning of its wheat market" may serve to boost wheat imports, the USDA noted. However, if prices rise enough to make imports commercially viable, domestic production will also likely increase enough to bring imports back down around 5 million tons "shortly thereafter."
 
China will still continue to produce a substantial amount of wheat, and imports will most likely play "only a small role" in the country's wheat sector in the next few years, the USDA said. Annual production is expected to remain at, or less than, 90 million tons, which may satisfy nearly all of its wheat demand, particularly if current estimates of China's wheat disappearance overruns actual disappearance.
 
China's total 2003-04 wheat consumption, or disappearance, was 104.5 million tons and is projected to fall to 102 million tons in 2004-05, the USDA said.
 
China began importing wheat at the end of 2003. It has committed to importing 7 million tons at the time of this report, the USDA said.
 
At this point, China remains solidly self-sufficient in food production, including, in recent years, wheat production.
 
At the same time, by promoting wheat production to avoid becoming dependent on foreign sources of food, China has missed opportunities to move to more lucrative crops and it has incurred large storage costs for its production surpluses, the USDA said.
 
Given those large costs, the USDA said that Beijing "will likely allow for more rational policies than promoting grain self-sufficiency in the rural sector, especially after moves to integrate into the world economy such as accession" to the World Trade Organization.
 
In other words, the USDA said, the government will be less likely to try to drive production decisions and will instead let market forces determine production and trade.
 

Source: USDA