December 15, 2003

 

 

China's Wheat Demand Likely To Stay Strong Thru 2004

 

China's demand for wheat, which has fueled world prices since October, is expected to stay strong through 2004 due to poor domestic crops, a vice-president of the country's state-run grain trading agency said last Friday.

 

China's fall-seeded wheat crop is forecast to be smaller than last summer's production of 82 million tons, said Yu Xubo, who noted China tends to consume about 100 million tons per year.

 

"In that case, we might reason that the future demand for the overseas wheat might be more than the current levels," Yu said in an interview with Reuters.

 

Yu, a vice-president in charge of grain imports with the China National Cereals, Oils and Foodstuffs Import and Export Corporation (COFCO), was visiting Canada with Chinese Premier Wen Jiabao.

 

The agency signed an agreement with the Canadian Wheat Board (CWB) last Thursday to buy 500,000 tons of high-protein spring wheat in 2004 - an agreement valued at about C$100 million ($76 million) at current wheat prices.

 

Yu said the sale price and delivery periods are still to be negotiated.

 

The Canadian Wheat Board has a monopoly on wheat exports from Western Canada, and is one of the world¡¯s largest wheat exporters.

 

China has bought an average of 2 million tons of Canadian wheat a year over the past decade, although more recent purchases average less than 600,000 tons a year, according to Canadian statistics.

 

Yu declined to speculate what portion of overall Chinese import demand the deal with the CWB would fill.

 

"For the time being ... we have requirements for higher quality wheat, so Canadian (wheat) will be the best to satisfy that demand," Yu said, adding untimely rains have hurt the quality of China¡¯s crop.

 

China may have some demands for lower-protein wheat later on, he said.

 

"There might be some requirements from the United States and there might be some requirements from Canada," he said.

 

US wheat traders were disappointed on Thursday after news of the Canada-China deal.

 

Chinese wheat buyers had been scheduled to visit the United States, but canceled the trip last month amid a trade spat.

 

COFCO is still trying to determine how much wheat Chinese millers need to import in 2004, Yu said.

 

"I think surely it will be greater than average in the past three, four years," Yu said. Imports will depend on domestic wheat prices, which climbed through fall, but recently stabilized, Yu said.