China may become top wheat importer after crops ruined
The crop damage across large swathes of China's farmland is adding to concerns over global food supplies after unfavourable weather in top wheat exporters the United States and the Black Sea region resulted in quality downgrades.
"The end users have been very relaxed about the wheat supply outlook," said Abah Ofon, a commodities analyst at Standard Chartered Bank in Singapore.
"But as the season is unfolding we are seeing bumps emerge. The market now has to readjust based on the new fundamentals which suggest the demand is going to be more than what the market was expecting."
Global output is expected to rise this year from last, but will still be below demand and leave the world with the lowest wheat stocks since 2008/09.
Chinese analysts and traders see less of a shortfall than those overseas, and have smaller estimates for total wheat imports of around five million to six million tonnes.
This is because they expect limited availability of U.S. soft red winter wheat at a price at which China is interested in buying. China is also likely to draw down its stocks to meet some of the demand.
The weather impact on China's wheat crop will make it harder for Beijing to maintain self-sufficiency in grains. As cities encroaching on arable land and rising incomes drive up demand, China is finding it harder and harder to feed the world's most populous nation with domestic supply.
China has also been snapping up corn shipments in recent weeks with imports forecast to climb to an all-time high of 7 million tonnes this year, according to the USDA.
Not Fit for Milling or Storing
Chinese farmers have traditionally relied on Beijing's annual stockpiling programme to protect their income. But the crop quality this year is so bad that even the state granaries are turning grain away.
At Xuchang city, trucks piled high with bags of wheat queued outside the state grain reserve warehouse. Several farmers looking to sell their wheat waited outside the building even though officials had rejected the stocks.
"The rains have caused the kernels to start sprouting, so the warehouse has refused to buy our wheat," said farmer Li Xiaohua, who has been waiting outside the warehouse to sell her stocks. "What can we do now."
She said her family could normally harvest about 500 kg of wheat on one mu (0.07 hectare) of land, but the volume has slumped to just 300 kg this year.
The wheat crop, hit by frost and rains in China, cannot be milled into flour and most of it will be used to feed animals.