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Strained political ties fail to hinder China's healthy appetite for Australian wheat

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Strained political ties fail to hinder China's healthy appetite for Australian wheat

Australia shipped at least 265,000 mt of wheat to China in June, taking the country's total exports to China to about 1.68 million mt for the current 2020-21 marketing year spanning October 2020-September 2021, according to shipping data from Advance Trading and Australian customs data.

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This was 22% higher than the volume China took for the full 2019-20 marketing year at 1.4 million mt.

Despite the ongoing spat, China was the second-largest destination for Australian wheat in June, just behind Indonesia that took 370,000 mt, or 13% of the total 2.77 million mt exported in June, based on shipping data from Advance Trading.

China booked four to six ships for August-loading cargoes, S&P Global Platts reported earlier in May. In recent weeks, another 200,000-250,000 mt was sold to China-based buyers from the East Coast Australia for September-October shipment.

Chinese feed producers have increased the proportion of wheat in their feed mix since 2020, following recommendations from the government to reduce reliance on expensive corn and soymeal by diversifying into cheaper alternative feeds, thereby driving demand for wheat imports.

China's persistently strong Australian wheat import demand relative to previous years took the market by surprise this season, given escalating tensions between the two countries.

"That [total 2020-21 exports to China so far] is tremendous! Do you think this would continue despite the trade dispute?" a procurement source at an Asian flour mill said.

Australia's wheat export pace to China, coupled with market talks of China's latest purchases, has also encouraged a few buyers in Asia to cover open demand sooner rather than later amid risks of supply tightness going forward, especially since Australia nears the end of its current marketing year.

South Korean flour millers decided to cover the remaining old crop demand from Australia June 30, booking a total of three ships, or about 136,800 mt, for September-October shipment.