Soaring Chinese wheat purchases due to weather-related crop damage at home could lift global prices of the grain by about 10 percent in the next few months, a survey of traders showed. The rush to secure wheat overseas by top consumer China is prompting farmers in the world's second-biggest exporter Australia to hold back sales of the grain to traders in hopes of higher prices, curtailing supplies.
China's buying spree is also driving up costs for leading wheat importing nations in Asia and the Middle East. The push for the imports comes as Reuters interviews with farmers and new analyst forecasts showed damage from frost and rains was estimated to have ruined as much as 20 million tonnes of China's wheat crop, equivalent to Australia's annual exports.
China has already booked more than 3 million tonnes of wheat shipments in the year to June 2014 - matching total imports for all of last year - and is estimated to need 10 million tonnes of imports for the year, which would be more than the 9 million that Egypt, the world's top buyer, is expected to purchase.
"Farmers are very cautious to sell forward," said Tom Puddy, head of marketing at CBH Group, Western Australia's bulk grain handler. "They are seeing China's interest in buying, so they are waiting to see how the crop progresses." Benchmark Chicago wheat futures have risen 1 percent this month after the US Department of Agriculture (USDA) estimated global wheat stocks at the end of the 2013/14 crop year would drop to their lowest since 2009.
The United Nations' food agency, though, played down the risks to global supplies for now but said Chinese buying could underpin wheat prices. "It could give some support to wheat prices which have been falling like all the other grains," said Abdolreza Abbassian, senior economist at the Food and Agriculture Organisation in Rome. "(China) had the frosts and that had some impact, so there is a greater need for quality wheat."
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