September 22, 2010

China's wheat imports leap in August

China's agriculture commodity imports surged in August, with wheat shipment rising more than 10 times on-year to 88,775 tonnes, though they eased from 132,148 tonnes imported in July.

Official customs trade data released Tuesday (Sep 21) showed imports in the first eight months topped 1.1 million tonnes, already surpassing the full-year volume imported to China last year.

The rise could mark the beginning of an upswing in the country's grain trade cycle, but analysts warn China is still nowhere near a full-fledged return to 2005 levels when as much as six million tonnes of wheat were imported during the year; shipments sharply tailed off in 2007.

Government officials have been keen to downplay the sharply higher grain imports, as they expend massive efforts to ensure a seventh consecutive record domestic harvest this year.

Poor weather conditions earlier this year threatened China's grain supply, potentially ending the country's six-year streak of record harvests. Food prices rose sharply in the first half.

However, China's wheat harvest this year, mostly completed, rose 0.9% on-year.

Yet, imports have continued to climb, raising questions about the true level of China's food security and its eroding barriers on wheat trade.

While a sharp deterioration is unlikely in China's grain supply situation, the sharply higher grain imports highlight what could be the beginning of a gradual shift from self-sufficiency to import orientation.

If China's wheat demand rises, Australia stands to benefit. It is already the leading wheat exporter to China, with such shipments last month up 250% on-year to 23,286 tonnes, according to the China's customs.

So far this year, Australia has exported 727,050 tonnes of wheat to China, more than three times the volume exported by its next-closest competitor in this market, Canada. The US and Kazakhstan are the only other two wheat exporters to China.