July 31, 2013

China's Australian wheat import continues to rise

In the past six weeks, China has rushed into the Australian wheat market, snapping up 1.5 million tonnes of grain, sparking hopes among grain traders that China may buy a record 3 million to 4 million tonnes of new-season wheat from Australia this year to boost its dwindling supplies.

The move follows extensive damage caused by frost and rain to China's summer grain harvest, which made at least 20 million tonnes, or 16%, of the nation's wheat crop unfit for human consumption.

The USDA two weeks ago raised its forecast for China's total grain imports from 3.2 million tonnes last year to 8.5 million tonnes in 2013-14, as the Asian nation turns to imports to fill the looming shortfall between production and demand.

The early unprecedented interest from China in an Australian wheat crop that will not start to be harvested before November has already lifted prices in forward selling contracts by US$10/tonne to US$15/tonne.

This time last year, China had bought just 500,000 tonnes of Australia's still-growing winter crops of wheat, oats and barley, with total annual purchases typically less than one million tonnes.

Overseas traders and analysts now estimate China's total wheat imports this year could rise above 10 million tonnes. Grain purchases of this scale would see China overtake Egypt as both the single largest buyer of Australian wheat and the biggest global importer.

Emerald Grain trading and marketing general manager Brian Dalitz said it was always hard to gauge China's buying intentions as the country's trading houses did not issue open sale contracts or tender, and dealt with individual companies confidentially.

Dalitz confirmed Emerald Grain had just sold 150,000 tonnes of next season wheat to be shipped to China after January. He said three other major traders, including Graincorp and Cargill, had also recently completed significant contracts.

China's new-found interest in Australian wheat exports is also being replicated in beef purchases. Meat and Livestock Australia (MLA) on Monday (Jul 29) confirmed expectations that total Australian beef exports for this year would exceed a record one million tonnes.

MLA chief economist Tim McRae said emerging Chinese demand was holding up the beef market, despite lower sales to Europe, US and Japan.