August 20, 2013

After severe flooding earlier this year cut into its reserves, China, the world's largest grower of wheat, is making its largest purchase of the grain from the US in nearly two decades.

China has purchased 3.7 million tonnes of wheat from the US so far this season, or nearly 4.6 times more wheat than last year's purchase of 805,400 tonnes.

In addition to the flooding this spring -- the worst in some areas since 1954 -- increased demand for high-quality wheat has dented grain stocks in China. A year earlier, China "controlled about 30% of the world's wheat stocks," Steve Mercer, spokesman for US Wheat Associates, said. The value so far of this year's wheat sales to China is conservatively over US$1 billion, or nearly 10% of total US wheat exports, Mercer said.

Factors influencing the growing Chinese desire for US wheat include affordable prices, the consumer preferences of a rising middle class, and a growing urban population resulting from a demographic shift from the countryside, which has also led to a demand for higher-quality food products, including more protein and animal feed.

Sinograin, the name given to the state-owned China Grain Reserves Corporation created by China's State Council in 2000, is currently in the process of shoring up the nation's grain reserves. Food security has long been a core national security concern for the Chinese government, hence the creation of Sinograin. Mercer said the food is a "huge … security issue for them."

While wheat sales for the year are not complete, this would be their highest level to China since the 1991-92 season, the agriculture department spokesman said, adding "current USDA projections forecast that China will import 8.5 million tonnes of wheat from all sources in the 2013-14 crop year" – with some 43% coming from the US.