February 24, 2004



US Wheat Sales To China To Face Tougher Competition


US wheat sales to China may face increasing competition from Canada and Australia, grain traders said on Monday.


Till date, China has bought almost 3 million tonnes of U.S. wheat since mid 2003 worth at least US$500 million.


"They will continue to buy wheat on world markets, but we have to keep in mind that there are many other sellers of wheat also. They will continue to go to Canada and Australia," said grains analyst Shawn McCambridge of Prudential Securities.


"We will continue to see tough competition," he added.


Export promotion group U.S. Wheat Associates on Monday said Chinese wheat officials purchased 900,000 tonnes of U.S. wheat during a visit to the United States last week.


The U.S. Agriculture Department confirmed on Monday that China bought 325,000 tonnes of U.S. wheat last week, adding to the 100,000 tonnes in sales the agency reported on Friday.


The news rallied wheat at the Chicago board of trade, where March wheat futures were up 14-1/2 cents at US$3.86 per bushel at midday.


China, which exports feed wheat to its Asian neighbors, signed agreements in December to buy 1 million tonnes of wheat from Australia and 500,000 tonnes from Canada. Those countries and the United States are the world's top three wheat exporters.


McCambridge said China's voracious appetite for U.S. wheat was being driven by consumer demand and Beijing's need to correct its gaping trade surplus with the United States.


Rapid economic growth in the world's most populous nation is fueling consumer demand for flour used in bread and noodles, grain analysts said. Domestic stockpiles were also falling.


Late last year, the Bush administration began pressuring China to ratchet up its imports of American goods to reduce a large trade gap between the two countries.


China quickly responded, buying U.S. airplanes and agriculture commodities.


U.S. Wheat Associates spokeswoman Dawn Forsythe said on Monday that a Chinese wheat trade team that ended a week-long visit to the United States on Friday bought 900,000 tonnes.


"The leader of the team, Zhou Mingchen, told our officials he was happy to conclude deals for 900,000 tonnes of wheat," Forsythe told Reuters, adding that the amount was in addition to the U.S. supplies Beijing had already purchased.


As of Feb. 12, China had bought 1,085,300 tonnes of U.S. wheat for shipment in the 2003/04 marketing year that ends on May 31 and another 910,000 tonnes for shipment in the 2004/05 marketing year, according to USDA.


Zhou, chairman of China's COFCO state trading enterprise, told wheat officials in Portland, Oregon, on Friday that China would ship a total of 1.7 million tonnes of U.S. wheat from the U.S. Pacific Northwest in calendar 2004.


Grain traders said the bulk of the 900,000-tonne purchase would likely be spring and white wheat for shipment from the Pacific Northwest, which has a shorter and cheaper ocean route to Asia than from the U.S. Gulf.

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