August 26, 2024

 

Slower pace for China's wheat buying in H2 2024

 

China's wheat buying spree is likely to slow in the second half of 2024 as higher domestic output and declining flour consumption reduce import demand in the world biggest consumer of the grain.

 

China has made record wheat purchases in recent years and a reduction in buying is expected to put additional pressure on global prices which are trading close to their lowest in four years amid plentiful supply, traders and analysts said.

 

Estimates for China's July-to-December wheat imports range between two million tonnes and four million tonnes, according to a survey of one China-based and two Singapore-based grains traders, down from 4.09 million tonnes shipped in the second half of 2023.

 

"There is lack of interest from Chinese wheat importers ever since supplies from this year's harvest hit the market," said one of the Singapore-based traders, who works for an international company that ships grain to China. "They are booking fewer cargoes. China's demand is unlikely to be as strong as we have seen in the past."

 

China's output of summer wheat, harvested mainly in June, rose 2.7% from a year ago to a record 138.22 million tonnes, with near-perfect growing conditions boosting quality.

 

China brought 10.08 million metric tons between January and July, up 15.6% from a year earlier, according to customs data, mostly from the United States, France, Australia, and Canada. Those imports, fuelled by fears of weather-related crop damage, exceed the wheat import quota allocated by Beijing of 9.636 million tonnes for 2024, and the additional volumes will have an import duty of 65%.

 

"Domestic wheat production and large imports are putting pressure on prices," said Ma Wenfeng, senior analyst at Beijing Orient Agribusiness Consultancy. "At the same time, the economy is declining ... the price of processed flour products have dropped sharply."

 

China's economy expanded by 4.7% from a year earlier in the second quarter of 2024, missing expectations of 5.1% growth and slowing from the first quarter as consumer purchases declined.

 

Spot wheat prices in Henan province, which accounts for a third of China's output, have been declining most of the year and are at their lowest since June 2021.

 

The price decline comes despite repeated announcements by state-stockpiler Sinograin and its affiliates pledging to buy more new crop wheat for reserves.

 

"There will still be imports in the latter half of this year due to different milling and protein needs, but this year's crop was very good," said Darin Friedrichs, co-founder of Shanghai-based Sitonia Consulting.

 

The use of wheat in animal feed is also expected to drop due to plentiful supplies of cheap corn and soybeans.

- Reuters