China buys US wheat as domestic prices hit record

PHOTO: China buys US wheat as domestic prices hit record

BEIJING - Wheat mills in China, the world's top consumer and producer of the staple, have resumed imports from the United States and Canada, spurred by record domestic prices and falling global prices of the grain, industry sources said on Wednesday.

China has bought several cargoes of high-protein wheat from the US and Canada over the past few days and import orders are expected to increase as local supplies stay tight until May, when the new harvest hits the market, trade sources said.

Increased demand from China could help reverse a month-long decline in Chicago wheat futures, which hit a six-month low last week. Prices have been falling since November amid expectations of high US stocks of the grain and slower demand.

"The US wheat prices have fallen a lot over the past week so some Chinese buyers have placed orders and the mills are still buying," said one executive with a flour mill in the province of Guangdong, who declined to be identified as he was not authorised to speak to the media.

"We need high-quality wheat for blending and if US prices stay attractive, more imports are expected," he added. He was not clear about the number of cargoes booked, but said the price (CIF) for US high-protein wheat was about $390 per tonne.

Apart from US wheat, China has also bought one cargo of Canadian wheat in the past few days, a second trade source said. China bought more than 500,000 tonnes of Canadian wheat in October, traders said.

China's renewed appetite for imports comes as domestic spot wheat prices have surged after diseases hit output last year. Domestic prices of general quality wheat W-EXWZGZ-GEN scaled a record 2,550 yuan ($410) a tonne in the top wheat producing province of Henan this week, while prices for high-quality wheat reached nearly 2,700 yuan ($430) per tonne in the consuming areas in Guangdong.

"We expect tight supply before the harvest of the new wheat and domestic prices are also expected to keep rising. The market was sceptical about the government's official wheat output data last year," said one analyst with an official think-tank.

The government has estimated the country's winter wheat harvest at a record high of 114.3 million tonnes in 2012, up 3 per cent on the year, but the analyst said output was 10 million tonnes lower than 2011, reduced by widespread disease.

Although Beijing has raised weekly wheat reserve sales to 5 million tonnes since December to help quell prices, traders said supplies of high grade wheat were still tight, as the government's old stock was of poor quality.