August 28, 2010

 

Australia triples 2010 wheat exports to China

 

 

Australian wheat exports to China have already risen three-fold this year, with shipments in the nine months to June 30 totalled 740,000 tonnes, compared with 238,000 tonnes in the full marketing year ended September 30, 2009, according to official data.

 

Exporters cited several factors underpinning a trade that has generated about AUD230 million (US$206 million) in export income already this year, including difficult internal Chinese logistics, the qualities of Australia's white wheat that allow it to be favourably blended with variable local grades, and the deregulation of bulk wheat exports from Australia in July 2008.

 

Previously, flourmills in China did not have direct access to Australian wheat, as the former export monopoly operator AWB Ltd (AWB.AU) only sold wheat to Cofco Ltd, the Chinese government's grain importer.

 

"Now with deregulation, this is a clear example of customers in certain markets now having access to Australian wheat, unlike before," said Tom Puddy, wheat manager for the Grain Pool marketing unit of Cooperative Bulk Handling Ltd (CBH).

 

CBH accounts for about 35% of the export trade to China so far this year, or about 250,000 tonnes, with AWB shipping a little more than 300,000 tonnes. Other companies involved include GrainCorp Ltd (GNC.AU) in both the bulk and container trade, the Elders Toepfer Grain joint venture and Glencore Australia.

 

The increase in Chinese buying this year chiefly reflects their wish to replenish inventories, which have been sold down in recent monthly domestic tenders. Moreover, private buyers have been issued with import quotas allowing them to buy direct from Australian suppliers without going through Cofco.

 

AWB General Manager for Commodities, Mitch Morison, said Australia cargoes, mostly of wheat around 10% protein levels, are being shipped chiefly into Guangdong province in the south and to a lesser degree Shandong province in the north.

 

It is cheaper for the Chinese to import wheat sometimes than to haul internally, particularly in the south, where there's consistent demand, he said.

 

In addition, there are internal quality issues, given the sometimes highly variable milling yield and mixed qualities of some domestic wheat grades, which are blended with imported Australian wheat, he said.

 

"We would expect to see over time a continual increase in Chinese demand for imported grain," Morison said.

 

Indonesia remains the biggest buyer of Australian wheat, taking 2.20 million tonnes in the nine months ended June 30, or 21% of total exports.

 

Morison added demand is rising from Indonesia as new mills come on line, and from Sudan and Yemen.