China's falling stocks of imported wheat and Beijing's on-going efforts to aid domestic wheat prices will continue to prompt mills to source cheap, high-quality wheat overseas this year, traders said on Tuesday. Beijing has nearly sold off its foreign wheat stocks, which peaked at about 11 million tonnes and were largely imported from the United States between 2003 and 2005.
"Many flour mills have shown interest in imports, particularly from Central Asia or Kazakhstan, which are very attractive in price," said Ma Wenfeng, an analyst with Beijing Agri-Business Consulting Co Ltd COFCO Co Ltd, the country's largest trading house, has signed to buy about 20,000 tonnes from Kazakhstan over two months for less than $200 per tonne, said Ma. The price was 40 percent lower than China's own high-quality wheat.
A COFCO wheat trading manager contacted by Reuters declined to comment on the amount, but said future import volumes would depend on market demand and prices. China's wheat imports surged in the first two months of the year to 181,264 tonnes, up 93 percent from a year earlier. Imports in the whole of 2009 totalled 893,710 tonnes, nearly three times the volume in 2008, according to official Customs figures.
Kazakhstan, Central Asia's top grain producer, wants to double Black Sea shipping subsidies to encourage exports after a bumper harvest. But the COFCO manager said he was unware of any subsidies on China's imports, which come by train. Besides Kazakhstan, imports of Australia Standard White (ASW) have also risen, thanks to cheaper prices than soft red wheat from the United States, said Chinese traders.
"There is no chance of importing wheat from the United States. Prices have gone up, but there are often chances to find good prices for Australian wheat following swings in the Australian dollar," said one executive with Shenzhen Four Gardener Co Ltd, a major flour mill.
IMPORTS NOT DUE TO SHORTAGES Beijing has been regularly releasing its foreign wheat stocks over past years to meet rising demand for special quality wheat for making cakes and bread. China could not produce such high quality wheat itself, so it had to import.
The majority of domestic consumption is for noodles and steamed buns, which can be made with Chinese wheat. Beijing raises minimum wheat prices every year in an effort to keep farmers growing grains, with this year's prices up by 3.4 percent to 1,720 yuan-1,800 yuan ($252-$264) per tonne.
"The government is paying higher and higher prices every year. That trend has led to imports because sometimes they are cheaper," said the Shenzhen executive. "We believe this year's import quotas will be used up." China allocates only 964,000 tonnes of lower-tariff import quotas to commercial buyers every year, 10 percent of its total commitment to offer 9.64 million tonnes every year, as required by the World Trade Organisation.
"The government has sold almost all of its old stocks of imported wheat. If nothing special happens, we expect mills could use up all the quotas or may ask for more," said Ma. But traders expect China's own wheat crop, which is to be harvested in May, to stay at last year's level of about 115 million tonnes.
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