China is likely to import more feed wheat as dry weather threatens corn plantings in some areas and the upcoming harvest for the country's largest wheat growing region of Henan, analysts said. "If the drought gets worse this month, wheat output (nation-wide) may fall below 100 million tonnes" from last year's 115 million tonnes, said one analyst with an influential private consulting firm, Shanghai JC Intelligence (JCI) Co Ltd.
"China's wheat imports could jump this year, of which a majority of the imports would be feed wheat due to tight corn supply. Feed mills are going to blend more wheat if corn prices rise faster in coming months," said the JCI analyst. JCI estimated China's wheat imports this year could rise to between 2 to 3 million tonnes, up from 1.2 million tonnes last year.
Imports in the first quarter of the year fell 33 percent to 250,478 tonnes as China has slowed down milling wheat purchases after US wheat rose more than 18 percent since December on weather and tight supply concerns. "Hydro electricity production is down quite significantly from last year which to us indicates that there are larger problems in China and one rain storm is not going to fix that problem," said Adam Davis, a senior commodity analyst at Merricks Capital, a Melbourne-based funds manager.
"The wheat issue is certainly critical and severe but if it remains dry for spring planting of corn then there are larger ramifications for the world balance sheet of corn," said Davis. Dry weather in Henan and adjoining provinces in north China could affect upcoming corn plantings, though conditions in the north-eastern corn belt are so far normal due to favourable weather.
Prospects for China's wheat harvest due to start later this month boosted Dalian corn prices, which rose to a record high of 2,369 yuan ($364.636) per tonne on March 20, but eased after Beijing moved to curb corn demand from industry. China, the world's top producer of wheat, has ample stocks estimated as high as 100 million tonnes, equivalent to one-year consumption, enough to cover its needs even in a worst case drought scenario.
China Securities Journal on Wednesday cited the Henan government Office of Flood Control and Drought Relief as saying that 1.078 million hectares of wheat in the province, which produces about 26 percent of the country's total, was affected by drought. That area accounted for about one fifth of 5.28 million hectares of wheat acreage a year ago.
"The drought damage to wheat is not serious, farmers have been active in watering the crop," said Guo Tiancai, a wheat expert with Henan Agriculture University. "Even with the worst scenario, the province would produce a similar size as last year's " of about 31 million tonnes, said Guo, also a member of wheat experts group of the agriculture ministry, adding farmers in Henan has expanded acreage this year.
He said it was too early to estimate final harvest as weather in May is still crucial, but water supplies from rivers and reservoirs shall be enough for irrigation of a majority of the crop. The government however in April for the time ever released wheat from state reserves for feed mills. The United Nations Food and Agriculture Organisation said on Tuesday that world food prices are set to rise again as concerns persist over dry weather affecting Chinese and US winter crops.