China’s Wheat Imports Increase Despite High Production
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China Wheat Production Is Not Keeping Up With Domestic Consumption
With a yearly harvested area of 24 Mha, China is the world’s leading Wheat producer. In MY 2019/2020, China’s Wheat production exceeded its domestic consumption by 8 Mmt. However, in MY2020/2021, due to the animal feed demand increasing by 21 Mmt YoY (~ +110% YoY), the delta between domestic consumption and production peaked at 16 Mmt. In MY 2021/2022, the delta between domestic consumption and production remained positive albeit declining by 5 Mmt YoY. The USDA estimates that in MY 2022/2023, production and domestic consumption will decrease by 2 Mmt and 4 Mmt YoY, respectively. Thus, the delta between consumption and production will decline by 2 Mmt YoY. China needs to import Wheat to meet its domestic consumption. However, the country tends to gradually cover this gap, unlike what happened in 2020/2021.
Figure 1: China’s Wheat Production MY(2018/2019-2022/2023)
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China Wheat Imports Come Mainly From Australia
China’s Wheat imports reached 9.8 Mmt in MY 2020/2021. At that time, Australia was the largest supplier with 3.69 Mmt, followed by the U.S. with 3.05 Mmt. In MY 2021/2022, Australia remained China’s largest Wheat import origin, increasing volumes by 2.02 Mmt YoY. Meanwhile, the US Wheat supply decreased by 2.32 Mmt YoY, taken over by France with 1.31 Mmt of Wheat exports to China. So far, in Q1 MY2022/23, Australia is leading China’s Wheat import market with 1.75 Mmt, followed by the US with 600 kmt. While Australia produces 25.84 Mmt of Wheat on average, the U.S. produces twice as much, with 51.64 Mmt on average. Therefore, China’s Wheat imports don’t have the same significance for both exporters.
Figure 2: China’s Wheat Top Export Markets MY (202/21 – 2022/23)
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Australia Depends on Wheat Exports to China, But the U.S. Don’t
China’s Wheat imports’ main origins are Australia and the U.S. In MY 2021/22, Australia exported 24.1 Mmt of Wheat, of which nearly 5 Mmt (~21%) headed to China, making China the top destination for Australia. Indonesia ranks second destination by 2.2 Mmt less than China’s imports from down under in MY 2021/22. Meanwhile, while total U.S. Wheat exports reached 17 Mmt, China ranked as the seventh destination for the U.S., with 0.7Mmt (~4%) of imports; the main destination for U.S. Wheat exports being Mexico, with 3.5 Mmt in MY 2021/2022 (2.7 Mmt more than China imported from the U.S. in the same year). Overall, the U.S. has struggled to export Wheat to China since it came out of the Phase One deal . Meanwhile, China remains the main destination for Australia Wheat exports, despite import restrictions issued by the Chinese government in 2020.
Figure 3: Australia and U.S. Top Wheat Destinations in MY 2021/22
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China Hasn’t Imported Any Wheat From the U.S. Between February & June 2022.
In Sept 2020, U.S. Wheat CFR China prices were USD 14/mt lower than Australia’s. However, since Oct 20, U.S. prices have continued to rise, peaking at USD 357/mt in Jun 2021, USD 53/mt higher than Australia’s. Between 2021 & 2022, U.S. and Australian Wheat CFR prices have risen by USD 200/mt and USD 80/mt YoY, respectively. In Feb 2022, U.S. prices surged, reaching USD 556/mt in Jun 2022. At the same time, China did not import Wheat from the U.S. and increased its monthly imports from Australia, reaching a peak of 753 kmt in Jun 2022. However, by the start of MY 2022/2023, CFR indications from Australia and the US fell by USD 10/mt and USD 3/mt YoY in Oct 2022, respectively. At that point, China started importing from the U.S. again(0.6 Mmt). Will China continue imports from the U.S. Wheat for the rest of MY2022/2023, as Australia’s new crop comes in Dec 2022?
Figure 4: Australia and U.S. Wheat CFR Indications
and Exports to China in MY(202/21-2021/22)
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In a Nutshell
Although China is the largest Wheat producer globally, its domestic Wheat consumption has reached higher volumes since 2020/2021, due steep to an increase in feed demand. And as domestic production stagnates, China’s Wheat imports have increased to 10.62 Mmt in 2020/21.
Australia is the first origin for China’s Wheat imports and the U.S. is the second. Yet, for the U.S., China is only the seventh export destination, and Mexico ranks first (3.5 Mmt in MY 2021/22).
Due to U.S. Wheat CFR price indications to China surging in MY 2021/22, China’s imports were minimal and almost stopped between November 21 and July 22. Meanwhile, Australia Wheat CFR price indications only slightly increased compared to the U.S. and the Australian product became even more competitive, leading to China increasing Wheat imports from down under. Therefore, Australia remained China’s primary Wheat import origin.
Finally, In the MY 2022/23, USDA estimates domestic consumption to remain higher than production. Therefore imports will remain important but probably less than the previous year, as the difference between consumption and production will decrease by 2 Mmt YoY. As such, will China continue importing from the U.S.?
