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China grain imports seen near record high

Cereal and oilseed imports to China, the world's biggest buyer of farm goods, will remain near record highs this year despite a recent spate of cancellations as lower global prices and a domestic output shortfall prompt purchases, reported Reuters. 

China's wheat imports from Australia in January and February this year have nearly quadrupled from the same time last year, the latest customs data show. That trend should continue even after Beijing cancelled or postponed 1 million metric tons of Australian wheat last week.

The cancellations, along with those for about 500,000 tons of US wheat, had raised concerns of flagging Chinese demand, which because of its outsized role in global agriculture markets could have led to lower prices.

But traders and analysts say the cancellations will not impact overall demand as lower wheat prices will spur buying, along with more government funds allocated to boost grain and oil seed stockpiles. 

"China's imports of wheat and barley from Australia are running at break-neck speed," said Ole Houe, director of advisory services at brokerage IKON Commodities in Sydney.

"And they are buying large volumes of soybeans, corn and wheat from other origins as well, such as the United States, France and Ukraine. The reality is that grain imports are going to be similar to last year's record pace."

China spent $234 billion on agriculture imports last year and is the world's biggest soybean buyer, taking more than 60% of the oilseed shipped worldwide, mostly from Brazil and the United States.

It has also become the top wheat buyer in recent years, particularly for higher quality grain, mostly from Australia, Canada and the US China was the second-largest corn importer last year, mainly for animal feed, with buying driven by higher local prices.

Crush margins turning positive this month have driven soybean imports, with processors in the hub of Rizhao making 114.29 yuan ($15.88) per ton after incurring losses since October.

"Crush margins in China have improved as Brazilian prices have declined due to a big crop entering the market," said an international grain trader in Singapore. "We expect buying to pick up from April and overall China's imports this year will be similar to last year."

China bought 99.4 million tons of soybeans in , up 10.3 million tons from a year earlier.

The US Department of Agriculture forecasts China's soybean imports at 103 million tons in the marketing year ending Aug. 31, .

"Increased soybean meal inclusion rates due to competitive prices, stable demand in the poultry sector, and growing demand in aquaculture is expected to offset weaker demand in the swine sector," it said in Wednesday's report.

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China has been stockpiling more food in the aftermath of supply chain disruptions from the coronavirus pandemic and the Ukraine war.

A slowing economy has moderated import growth, traders and analysts said, but demand continues to rise with a growing middle class in the nation of 1.4 billion people.

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For wheat, traders said the size and quality of the June harvest will determine China's imports, although Beijing is expected to continue buying higher quality grains for bread and pasta.

"The issue is that China will always need to buy good milling wheat from the US, Canada and Australia," said Stefan Meyer, a grains broker at StoneX in Sydney. "China needs wheat to blend with its domestic wheat quality, which is not very good."

Crop quality declined because of adverse weather ahead of last year's harvest, prompting record imports, with some of the damaged wheat believed to replace corn in animal feed.

However, China's corn imports have been rising as feed makers take advantage of lower international prices.

China imported 6.19 million tons of corn in the first two months of this year, up 16% from a year ago. Full year imports are likely to remain steady, a Shanghai-based analyst said.

China also snapped up Australian barley for malting and animal feed after lifting punitive duties on the grain in August. In the first two months of the year, China's barley imports nearly tripled from a year earlier to 2.71 million tons, mostly from Australia.

(USD $1 = 7. Chinese yuan renminbi)

China's soaring import volumes of grains and soybeans continued into , with Brazil for the first time contributing a double-digit share of corn shipments. With China seeking to diversify food purchases away from the US, the Asian country is expected to increasingly rely on Brazil to meet its growing import demand. 

China's grain imports have been rising strongly for years, and corn imports are up more than twentyfold since . In February of this year, imports of both corn and wheat reached record volumes. Corn shipments for the month were up nearly 60% from a year earlier, with the US accounting for nearly 40% of the total and Ukraine and Brazil each representing about a one-quarter share. 

China opened its corn purchases to include Brazil last spring, as Gro wrote about here, partly to replace grain shipments blocked by the Russia-Ukraine war. This year, Brazil looks set to take an even greater role as higher corn acreage and favorable weather look set to deliver a record harvest, based on Gro's machine learning-based yield forecast model. 

Brazil's corn exports typically peak after May, and they represent major competition to US sales. Roughly 25% of total US corn export volumes currently go to China. US corn sales to China were valued at $5.1 billion for . China has purchased roughly 2.75 million tonnes of US old crop corn since mid-March.  

China's rising imports of grains and soybeans, much of which goes for animal feed, are largely driven by domestic pork demand. In January and February, Chinese pork consumption rose by more than 50% from a year earlier, as COVID pandemic restrictions were eased. 

While such a fast growth rate isn't sustainable, Gro expects continued year-over-year increases in pork demand in and , based on Gro's China Pork Demand Forecast Model. Healthy inventories of hogs also will ensure strong demand for grain this year. 

Higher wheat imports so far this year have been supported after import margins turned positive in January. But increases in corn import volumes came despite negative import margins. 

China's soybean imports also increased in the first two months, up 16% from a year earlier, although volumes were down in February from January. A majority of the soybean imports in February came from the US as Brazil faced setbacks due to heavy rains. But the large Brazilian soybean supplies expected to arrive over the next few months, as Gro wrote about here, may have China less interested in US soybeans until next year. 

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