October 17, 2012

 

China purchases 295,000 tonnes of Canadian spring wheat

 

 

Over the past two weeks, China has purchased 295,000 tonnes of Canadian spring wheat, signalling China's biggest appetite for the high-protein wheat in years.

 

Some of the cargoes are expected to be delivered in November and others in January and later in Canada's current 2012-13 marketing year.

 

The sources said total sales over the past two weeks could be as high as 500,000-600,000 tonnes, but were unable to confirm it.

 

One grain industry source said China has shown plenty of interest in high-protein wheat, of which it is relatively short.

 

The sales may point to Chinese wheat production being lower than official estimates indicate, or to protein levels that are lower than expected, said Chuck Penner, analyst at LeftField Commodity Research in Winnipeg.

 

Traditional price premiums for higher protein wheat have diminished sharply this year with big crops in Western Canada and the US northern Plains, which would allow Chinese millers to blend Canadian supplies with domestic wheat relatively cheap, Penner said.

 

Talk of large Chinese spring wheat purchases reached US trading floors on Monday (Oct. 15), and by midday Tuesday (Oct. 16) the premium of nearby Minneapolis (MGEX) spring wheat futures over Chicago (CBOT) soft red winter wheat rose to US$0.77 per bushel, the highest level in 2-1/2 months.

 

Canada, the world's biggest exporter of spring wheat, used mainly in baking, also has more of the grain to sell this year, after harvesting its third-largest all-wheat crop in 13 years. Canada's federal agriculture department forecasts wheat exports of 14.8 million tonnes, up about 5% from the previous year.

 

The confirmed sales of 295,000 tonnes, just two and a half months into Canada's 2012-13 marketing year, represent more than three-quarters of China's purchases of wheat, excluding durum, from Canada for all of last year, according to Statistics Canada data.

 

In 2011-12, China bought nearly 377,000 tonnes of Canadian wheat excluding durum -- a category made up mostly of spring wheat. It averaged purchases of 110,500 tonnes a year in the five-year period ended in 2009-10.

 

On August 1, Western Canada's wheat and barley trade moved to an open market, allowing farmers to sell their grain to any buyer, not just to the Canadian Wheat Board.

 

China has also purchased 271,000 tonnes of US spring wheat in the current marketing year, which began June 1.