June 19, 2012

 

China's grain centre slashes 2012 winter wheat crop forecast

 

 

China National Grain and Oils Information Center has cut around 2% off its estimate of 2012 winter wheat yield for the country, due to widespread damage from a fungus disease.

 

The forecast adds to a darkening global supply picture after Australia this week slashed its winter wheat production forecast by more than 7%, following projections for harsh weather to hit output in top exporters Russia, Europe and the US.

 

The winter wheat now being harvested makes up about 95% of China's total wheat output, which was also revised down almost 2% to 118 million tonnes this year from an estimate of 120.3 million last month.

 

"There are large areas of wheat fields hit by outbreaks of pests and diseases in the south," the CNGOIC said, referring to the provinces of Jiangsu, Anhui and southern parts of Henan, the country's largest wheat-growing area.

 

"Output is lower than earlier expected while quality is also poor."

 

The centre has revised the country's winter wheat output down to 111.7 million tonnes from a previous forecast of 114 million, mainly because of the spread of wheat fungus disease.

 

But the latest forecast for winter wheat was still 0.8% higher than last year.

 

Flour mills said wheat quality in the southern growing areas was hit by outbreaks of the disease. A low quality of domestic wheat could prompt China to source more food-grade wheat overseas, industry officials said.

 

China's wheat imports could more than double this year after domestic crop production dwindles under the onslaught of bad weather and disease, analysts said.

 

Asian grain importers are turning to the US for cheaper milling wheat supply and Indian corn for animal feed, threatening to slow Australian wheat exports that have been running at a near-record pace in recent months.

 

China bought 110,000 tonnes of US soft red winter wheat on Thursday (June 14), the largest single purchase of that category in 8-1/2 years, the USDA said. The purchase helped rally winter wheat futures at the CBOT. But the contract, down nearly one% on the week, is down for its fifth straight month.

 

Crop losses could spur China to import up to five million tonnes of wheat this season, double the current forecast by the USDA for the 2012/13 season and up from three million tonnes in 2011/12, traders in the US said.

 

Analysts said the Chinese government was still holding more than 30 million tonnes of wheat stocks which could deter the country from importing a huge volume amid steady food demand. Some 20 million tonnes of low-quality wheat was used over the past year to substitute for expensive corn.

 

"There is good demand for US DNS (Dark Northern Spring wheat) and we also have a shortage at home of US red winter wheat and prices were attractive earlier when the Chicago Board of Trade prices were at a low level," said one executive with a domestic flour mill, who asked not to be identified as he was not authorised to speak publicly.

 

"Domestic production in some southern areas will be lower, some is of poor quality. For wheat in northern provinces, we are testing the quality to see if it is good for making bread," said the executive in the southern province of Guangdong.