China’s Waning Appetite for Grain Spells Danger for World Market

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(Bloomberg) -- China’s appetite for overseas wheat and corn is dwindling rapidly, which is likely to heap pressure on world grain markets that have grown...

-- China’s appetite for overseas wheat and corn is dwindling rapidly, which is likely to heap pressure on world grain markets that have grown accustomed to robust demand from the world’s top agricultural importer.Buyers in China haven’t been observed making any major purchases for a couple of months, according to a number of traders.

“The economy is really bad, and overall demand from the whole of society is slumping,” said Ma Wenfeng, a senior analyst at BOABC, a consultancy in Beijing. “The government wants to raise grain prices and increase farm incomes, to activate demand in rural areas. Rather than buying grain from overseas, it is better to buy domestically.”China has long been a massive buyer of soybeans, principally to nourish its vast hog herd, and is actively booking more cargoes.

Although the situation could turn around swiftly, particularly in the event of bad weather affecting harvests, China’s glut of grain is unlikely to thin dramatically while consumption remains so weak. Moreover, another year of bumper wheat and corn production is on the cards. But there’s pressure on shipments to fall even further. China manages its imports according to a quota system that this year would allow just over 7 million tons of corn and nearly 10 million tons of wheat at the lowest tariff of 1%. After that, duties shoot up to 65%.

Australia is realistic about the challenges in its diplomatic relationship with Beijing, Treasurer Jim Chalmers said, as the country prepares for the first visit by a Chinese premier in more than seven years.

 

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