It looks like Canada will account for about half of China’s wheat purchases this year.
The United States Department of Agriculture has lowered its projection of that country’s imports in 2005-06 to two million tonnes, down from 2.5 million last month.
Back in January, the Canadian Wheat Board signed an agreement with China’s grain importing agency for sales of one million tonnes in 2005-06.
That agreement doesn’t represent a firm sales contract, and the actual volume that will be shipped remains to be seen.
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“China has produced a larger crop than last year,” said Ward Weisensel, the board’s chief operating officer.
“Last year at this time they were purchasing significant quantities of wheat and that just hasn’t occurred in the same way.”
Nevertheless, having such an agreement this year is a big plus for prairie wheat growers, he said.
“These types of memorandum have real value because they provide early indication of commitments as to what parties want to achieve.”
China has been an unpredictable wheat market over the past decade, with imports ranging from as low as 200,000 tonnes in 2000-01 to as high as 12.5 million tonnes in 1995-96.
The average for the past 10 years is 3.1 million tonnes. The five years before that, imports averaged 9.3 million tonnes, with a high of 15.9 million.
Edward Allen, grain market analyst with the USDA’s economic research service, says that while the Chinese market is notoriously difficult to predict, the consensus among market watchers is that imports are unlikely to return to previous high levels.
Per capita consumption of wheat is dropping, especially in urban areas, due to increased income and a more diversified diet. Also, an increasingly modernized and mechanized economy means there is less physical labour, which is also reducing consumption.
“The overall impact is that per capita consumption of wheat for food is levelling off and starting to decline,” Allen said. “That obviously doesn’t augur well for huge increases in imports.”
Weisensel was more optimistic, saying wheat consumption in China is continuing to exceed production.
“Stocks continue to fall and that is positive for demand overall,” he said.
After seeing production slide and stocks decline in recent years, the Chinese government has brought in a number of incentives to support wheat as it competes for acres with higher value crops.
China’s carryout stocks at the end of 2005-06 are estimated by USDA to be 35 million tonnes, down from 60 million tonnes just three years earlier.
Production has increased from 86 million tonnes in 2003-04 to 92 million tonnes in 2004-05 to a projected 96 million tonnes in 2005-06.
“Some of the balance between supply-demand and import levels is going to depend on how lucrative the subsidy is for wheat compared to how much higher the returns are for alternative crops,” said Allen.
