China’s food demand and the state of its economy have jostled grain markets up and down in recent days.
The outbreak of avian flu in China is hurting feed markets, its recent purchases of wheat helped support the price of that grain and disappointing economic growth in the first quarter of the year is depressing all commodity prices.
Stocks and commodities — oil, metals, gold, grains — all fell April 15 after China released data on its first quarter.
The world’s second-biggest economy grew 7.7 percent from the same quarter a year ago.
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Model-based estimates used by Statistics Canada showed the 2025/26 crop year has seen increases in canola, corn for grain, oats and lentils production while seeing dips in spring wheat, durum wheat, soybeans and barley in comparison to 2024/25.
Canada and other developed countries can only dream of such growth, but for China that is a disappointment.
The trade had expected eight percent. Growth was 7.9 percent in the previous quarter.
The slowdown had traders thinking that China might not buy as much oil, metal, grain and other raw materials as expected.
Following the report, wheat lost the ground it had gained the previous week on a rally sparked partly by news that China had bought 360,000 tonnes of U.S. soft winter wheat for delivery in 2013-14.
That was later upgraded to 480,000 tonnes.
Analysts said China was taking advantage of recent cheaper wheat prices to rebuild depleted stocks.
That puzzled me because just a few days before, the U.S. Department of Agriculture had raised its estimate of China’s year end 2012-13 wheat stocks by three million tonnes, which was the lion’s share of the four million tonne increase in global year end wheat stocks.
However, in February the USDA agricultural attaché in Beijing challenged official USDA China wheat crop data.
The attaché said the 2012 harvest was only 108 million tonnes, well shy of the USDA estimate of 120.6 million tonnes, which matches China’s official estimate.
The attaché and private Chinese analysts say the country had a significant fusarium problem last year that hurt yields.
The recent buying of soft wheat for feed supports the idea that the official estimates are overly optimistic.
However, while China might need to rebuild grain stocks, its feed demand appears to be weakening.
There is a new type of avian influenza in China called H7N9 that has killed 14 and sickened 63 as of April 15.
This has rocked China’s poultry markets, limiting trade and driving down prices. An Agence France-Presse story estimated the poultry industry lost $1.6 billion in the week following the first case of the flu in humans.
That will likely lead to reduced poultry production and a resulting reduction in feed demand.
It is particularly troubling that flocks carrying the virus do not appear to be sick, making it hard to find the source of transmission.
Also, hog production has shifted into a contraction period because of high feed prices, falling hogs prices and tight production margins.
This has led to predictions that China’s soybean buying will decline after an eight-year tend of rapidly increasing imports.
The avian flu is still a modest worry, but the wheat imports might be the only price-positive news for grains to come out of China for the foreseeable future if the virus mutates or evolves into something more like the 2002-03 SARS outbreak.
