China is grabbing shipments of Australian wheat despite a trade standoff between the two countries, as crop downgrades elsewhere lead to lower global production.
The buying frenzy comes as Australia, a key global food supplier, expects a second consecutive record harvest, as producers in the northern hemisphere have been hit by adverse weather and drought .
China, the world’s largest importer of agricultural products, has imposed anti-dumping duties on Australian wine and barley and slashed purchases of Australian coal and beef during long-running conflict, but searches for wheat as prices approach the eight-year highs.
“It all depends on the availability of good quality wheat supplies at the right price for food security in China or any other country,” said Phin Ziebell, agri-food economist at the National Australia Bank in Melbourne.
“Of course there are postures on the trade dispute, but the food supply is essential.”
China has emerged as a major buyer of Australia’s upcoming wheat crop, taking nearly two million tonnes of the roughly five million tonnes farmers have sold so far from the 2021/22 harvest (July-June), which will be harvested at the end of the year, three business sources and an analyst told Reuters.
“Chinese buyers have canceled some shipments of French wheat for quality reasons, and they are turning overwhelmingly to Australia,” said a Singapore-based trader at an international food supply company.
World wheat prices hit their highest level since 2013 in August, amid expectations of lower production among major exporters due to adverse weather conditions in Russia and drought in the United States and Canada .
Chicago Board of Trade (CBOT) benchmark wheat futures were trading at $ 7.17-3 / 4 a bushel on Friday, not far from an eight-year high of $ 7.75 a bushel reached in August.
Quality downgrades from exporters such as France have exacerbated supply problems from China, which has canceled some shipments in recent weeks, sources say.
China is the world’s largest producer and consumer of wheat, but it still lacks the quality and quantity it needs.
The country is expected to produce 136.9 million tonnes of wheat by June 2022, but consumption during the period is estimated at 149 million tonnes, according to the latest forecast from the US Department of Agriculture.
“We are indeed expecting a bumper Australian wheat crop and China will certainly import, as Australian wheat appears to be the only best choice in the world,” said a Beijing-based trader with an international trading house, adding that the French wheat this year is “fundamentally doomed”. due to quality issues.
Australian forecasters last week raised wheat production targets to 32.6 million tonnes for the season ending June 30, 2022, which would place it only second after last season’s record harvest of the crop. the most valuable in the country.
The exceptional supply outlook represents a remarkable turnaround after three years of crippling drought in Australia which did not subside until early last year.
Source: Reuters (Reporting by Naveen Thukral; editing by Gavin Maguire and Richard Pullin)