China to boost wheat imports because of rain
China will tap global markets for more top-quality wheat after rains during last month's harvest damaged some 10 million tonnes, over 8 percent of the annual output. Those not growing wheat probably don’t realize that China is the world's top producer of the grain.
China has already snapped up wheat from the United States and France, and more buying will drive up international prices of milling-quality grains used for making bread and cakes.
The need for more imports into China will exacerbate tight supplies for the best wheat due to crop-damaging weather in the world's top exporters of the U.S., Russia and Ukraine.
"Rains have damaged wheat quality in southern parts of Henan and also parts of the province of Jiangsu," said Ma Wenfeng, an analyst at Beijing Orient Agri-business Consultant Co. "A lot of the wheat has started to germinate and can no longer be used for milling and is only suitable for animal feed."
Henan is China's biggest wheat growing area, producing around 31 million tonnes a year, while Jiangsu's output is about 11 million tonnes. Some 10 million tonnes of wheat has been damaged in Henan and is not good enough quality to be kept in national reserves, the state think-tank, China National Grain and Oils Information, has said.
Higher imports of top-grade wheat by China would drive up premiums for protein-rich spring wheat traded on the Minneapolis Grain Exchange and hard red winter wheat on the Kansas City Board of Trade.
While Chinese flour mills will be keen to buy high-quality Canadian and U.S. spring wheat, state-run Sinograin will focus on soft red winter wheat which can be blended with domestic grains to make flour, traders said.
Analysts said the outlook for global prices is more bullish than previously thought, given the damage to crops in key producers including China.
"The market is actually longer term bullish and rightly so as it is concerned about supply prospects going forward," said Abah Ofon, a commodities analyst at Standard Chartered Bank in Singapore. "Some of the risks that are on the horizon: China's poor quality crop, problems with wheat in the U.S. and also what we are seeing in Europe right now - really wet weather."
The discovery of unapproved genetically modified wheat in a field in Oregon spooked buyers in late May, with some shunning white wheat from the U.S.
The U.S. Department of Agriculture has estimated that China will import 3.5 million tonnes of wheat in the year to June 2014, but analysts and traders said purchases could be much higher.