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USDA sees China's 2020-21 wheat imports reach 10 mil mt, a 25-year high

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USDA sees China's 2020-21 wheat imports reach 10 mil mt, a 25-year high

Highlights

Imported wheat cheaper than China's domestic corn prices

China feed usage seen at a nine-year high 30 mil mt

France emerges as the largest supplier to China in H1 2020-21

Global wheat ending stocks cut by 9 mil mt from Jan

Russian wheat exports unchanged from Jan levels

New Delhi — China is expected to import 10 million mt of wheat in 2020-21, led by higher usage in feed as it aims to continue balancing a widening gap between burgeoning demand and limited grain supplies at domestic levels, according to the US Department of Agriculture.

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If realized, China's imports in 2020-21 (July-June) will be the highest in more than 25 years, the agency said in its World Markets and Trade report released Feb. 9.

Chinese wheat imports have been raised for the sixth consecutive month, driven by rising non-food usage, which is also expected at a record 30 million mt in 2020-21, up 10 million mt from the last year, USDA said. China's non-food usage is expected to surpass a level last seen in 2012-13, at 26 million mt.

Higher feed usage of wheat has been attributed to soaring domestic prices of corn, triggered by a growing domestic demand following a remarkable pig herd recovery in China. Corn is generally used in pig rations.

"Although most wheat imports are allocated toward human consumption, their relatively low import prices compared [with] China's domestic corn prices make wheat attractive for feed use in China's southern region," USDA said.

France emerged as the largest supplier to China in the first half of the 2020-21 marketing season, as prices of French imported wheat averaged $270/mt, $160/mt lower than domestic corn, and $120/mt cheaper than domestic wheat, according to the agency.

China remains an aggressive buyer of grains since the start of 2020, and the country is expected to continue on this path in 2021, as indicated by its record import estimates for corn, soybeans, and wheat.

China's wheat imports in 2020 already surpassed its tariff-rate quota of 7.2 million mt, according to China's customs data.

Global wheat outlook

USDA sharply cut global 2020-21 wheat ending stocks by roughly 9 million mt from a previous estimate, to 304.22 million mt, according to its World Agricultural Supply and Demand Estimates report, released Feb. 9.

The cut came as a surprise, as markets were not expecting a sharp drop, with USDA projections going well below S&P Global Platts Analytics' estimates of 313 million mt.

Argentina's 2020-21 wheat production was slightly reduced from a previous estimate to 17.2 million mt, as the crop continued to face dry and cold conditions over the marketing season.

Argentina's exports in 2020-21 have been also revised down by 500,000 mt from January levels to 11.5 million mt, as logistic issues weighed over the supplies. A series of labor disputes severely limited grain shipments from Argentinian ports.

In December 2020, Argentina only exported 900,000 mt of wheat, down 60% on the year, according to the USDA.

As labor disputes also delayed soybean and corn exports, Argentina wheat exports are expected to face further challenges over the next few months, as competition for port shipping capacity intensifies, the agency said.

Meanwhile, contrary to trade expectations, USDA kept Russian 2020-21 wheat exports unchanged from January levels, at 39 million mt.

Russia will introduce an export quota and tax on wheat shipments from Feb. 15, while a floating tax will come into effect from June 2, which has created some market jitters.

USDA also maintained US 2020-21 wheat ending stocks at January levels, estimated at 22.76 million mt, which is slightly higher than Platts Analytics' estimates of 22.59 million mt.