China’s Wheat Imports Skyrocket

China is now forecast to import 8.5 million tons of wheat in 2013/14, the highest in 18 years.

The sharp increase comes on the heels of reports that disease and adverse weather affected quality significantly in both 2012/13 and 2013/14. As a result, government reserves of millingquality wheat have fallen. Government reserve programs are designed to provide stability in the market by buying, selling, and storing wheat.

China’s wheat import Tariff-Rate-Quota (TRQ) is 9.6 million tons, of which the private sector has access to only 960,000 tons, while the government controls the rest. China has already purchased nearly 3.0 million tons of U.S. wheat, most of which is Soft Red Winter, along with reported purchases of Canadian, French, and Australian wheat. The imported wheat will likely be used for blending with lower quality domestic wheat for milling, for feed in the southeast provinces, and for rebuilding government reserves.

China also imported large quantities in 2003/04 and 2004/05. At that time, exporter supplies were more abundant. This year, however, exporter stocks are projected to be significantly tighter. Soft Red Winter wheat export prices are already rising, in part, because of China’s recent purchases and expectations of future sales.

WHEAT: WORLD MARKETS AND TRADE

OVERVIEW

Global production for 2013/14 is up modestly and trade is significantly higher, driven mostly by a boost in China’s imports. U.S. exports are boosted sharply this month, supported by China’s large purchases of Soft Red Winter (SRW) wheat and expanding opportunities in South America.

The season-average U.S. farm price is up from last month because of projected strong demand.

For 2012/13, trade and U.S. exports were raised slightly.

PRICES:

Domestic: Over the past month, prices dropped as winter wheat harvesting continued to pressure markets. Hard Red Winter (HRW) fell $25/ton to $300 and SRW dropped to a low of $258/ton before rising to $265/ton based on recent large sales to China. Soft White Wheat (SWW) fell $9 to $290/ton and Hard Red Spring (HRS) shed $24/ton to $329/ton.

TRADE CHANGES IN 2013/14

Selected Exporters

• Argentina is cut 500,000 tons to 6.0 million because the government restricted exports on tighter 2012/13 supplies.

• Australia is boosted 2.0 million tons to 19.0 million on larger exportable supplies and strong demand from China.

• Canada is up 500,000 tons to 19.5 million as a result of increased sales opportunities in South America with tighter supplies in Argentina.

• EU is raised 1.5 million tons to 20.0 million on account of stronger demand in Pakistan and Iran.

• India is cut 1.0 million tons to 7.0 million as it has become less competitive with other exporters.

• Kazakhstan is cut 500,000 tons to 7.0 million on lower exportable supplies.

• United States is boosted 3.0 million tons to 29.5 million supported by China’s large purchases of Soft Red Winter wheat.

Selected Importers

• China is boosted 5.0 million tons to 8.5 million evidenced by large purchases of U.S., EU, and Australian wheat.

• EU is cut 500,000 tons to 5.5 million as a result of larger production and Croatia’s inclusion into the EU.

• Iran is raised 500,000 tons to 2.5 million in view of recent purchases.

TRADE CHANGES IN 2012/13

Selected Exporters - based on trade data

• Australia is raised 800,000 tons to 21.3 million.

• Kazakhstan is raised 300,000 tons to 6.8 million.

Selected Importers - based on trade data

• Japan is raised 300,000 tons to 6.6 million.

• Morocco is up 300,000 tons to 3.6 million.

• Russia is up 400,000 tons to 1.4 million.

RICE: WORLD MARKETS AND TRADE

OVERVIEW

Global production in 2013/14 is still a record but is down from the previous month, largely due to revisions to U.S. production - the smallest planted area since 1987. Trade is down slightly, on account of lower Pakistani and U.S. exports. Global production for 2012/13 is down, with smaller crops in Pakistan and Vietnam. Trade is reduced on lower demand from traditional importers.

FEATURE

In contrast to historical price movements in tandem, the U.S. and Thai export quotes have recently moved in opposite directions. While the United States nears the end of the marketing year of a smaller-than-normal crop, Thailand seeks to sell its plentiful supplies. The Thai government supports domestic procurement prices through the Paddy Pledging Program, but recently attempted to lower the prices. However, pressure from farmers reversed the decision, and prices for the next season have not been finalized. Additionally, the government announced that it will sell some of its massive stocks. Meanwhile, the U.S. crop will be harvested in the coming months, but it is even smaller than the previous year. Estimates for total U.S. supplies for 2013/14 are the tightest in over a decade, and the projected season-average farm price is up from last month.

TRADE CHANGES

Selected Exporters

• Thailand is slashed 500,000 tons to 7.0 million in 2013 on the slow pace of exports as the high support prices have kept export prices uncompetitive.

• Pakistan is reduced 200,000 tons to 3.0 million for 2013 on a lower crop due to flooding; it is also reduced 200,000 tons to 3.0 million for 2014 as a lack of reliable power supplies continues to hamper the entire export chain.

• China is raised 150,000 tons to 450,000 in 2013 and to 350,000 in 2014 as exports to East Asia have been stronger than expected.

• United States is lowered 100,000 tons to 3.1 million in 2014 on tighter supplies.

Selected Importers

• Indonesia is lowered 500,000 tons to 1.0 million in 2013 on slow shipments to date.

• Nigeria is cut 100,000 tons to 2.3 million in 2013 as high tariffs continue to impede imports.

COARSE GRAINS: WORLD MARKETS AND TRADE

OVERVIEW

World corn production in 2013/14 is down slightly with smaller forecast crops in the United States and China. Global trade is mostly unchanged and the U.S. season-average farm price remains the same as the prior month’s. For 2012/13, U.S. exports are lowered but the seasonaverage farm price is unchanged.

PRICES

Since the release of the June WASDE report, U.S. corn quotes have mostly risen, gaining $17/ton through the first week of July to nearly $311/ton. The retreat following USDA’s Grain Stocks and Acreage reports was short-lived as tight old-crop domestic supplies continue to outweigh weak foreign demand. Argentine quotes collapsed after the USDA reports and remain at sizeable discounts to both U.S. and Brazilian corn. Argentina’s harvest is nearing completion and an export window of opportunity looms between Brazil’s second crop and U.S. new-crop harvests. Ukrainian quotes were unchanged, reflecting slack old-crop trade.

TRADE CHANGES IN 2013/14

Selected Exporters

• EU corn is up 200,000 tons to 2.7 million on the integration of Croatia into the European Union (Croatia’s data is removed from the database).

TRADE CHANGES IN 2012/13

Selected Exporters

• U.S. corn is slashed 1.0 million tons to 17.5 million as the slow pace of shipments is expected to continue through September; Brazilian corn is boosted 500,000 tons to 27.0 million.

• Canadian corn is raised 400,000 tons to 1.4 million on strong shipments to the United States.

• EU barley is boosted 200,000 tons to 4.2 million reflecting late-season export licenses.

• U.S. sorghum is cut 200,000 tons to 1.9 million on tight feed supplies through late summer.

• Argentine sorghum is up 200,000 tons to 3.6 million on strong early season (new-crop) shipments.

Selected Importers

• U.S. corn is boosted 200,000 tons to 4.0 million on imports from Brazil, Canada, and Argentina.

• Ecuadorian and Salvadoran corn are each cut 200,000 tons to 250,000 and 350,000, respectively, on a slow pace of shipments.

• Indonesian corn is raised 500,000 tons to 2.4 million on smaller old-crop production and larger-than-expected trade from India.

• Mexican corn is down 500,000 tons to 6.5 million due to the slow pace of shipments from the United States.

• Chinese barley is cut 200,000 tons to 2.2 million on weak demand from the brewing sector.

• Saudi Arabian barley is boosted 200,000 tons to 7.7 million based on trade data