China-Australia relations: exploding Australian wheat exports step up to meet high demand despite tensions

Su-Lin Tan
·4-min read

China’s imports of Australian wheat have exploded despite their ongoing political tensions, with Australia’s bumper wheat harvest continuing to plug shortages of the grain from other key markets.

Purchases of wheat by China from Australia over the first two months of the year were 479.3 per cent more than the amount acquired over the same period last year, latest data from China’s customs showed, even though its overall imports from Australia have fallen slightly.

China’s strong demand for wheat is a result of increased feed requirements to accommodate the rapid recovery of its domestic pig production, its Ministry of Commerce said.

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But the demand has come with exports from key wheat markets, such as Russia and the Black Sea, falling short due to dry weather and Russia curbing its exports amid a fight against domestic food inflation. Wheat is also in high demand after prices of other feed raw materials, such as corn and soybeans, soared.

A wheat field near Moree, Australia. The crop is in high demand after prices of other feed raw materials, such as corn and soybeans, soared. Photo: Reuters
A wheat field near Moree, Australia. The crop is in high demand after prices of other feed raw materials, such as corn and soybeans, soared. Photo: Reuters

“The food production enterprises and farmers also tend to stockpile and are reluctant to sell, which also drove the increase in food prices,” Ministry of Commerce spokesman Gao Feng said on Thursday.

“The increase in food prices since 2020 is the result of multiple factors. The worldwide spread of the Covid-19 pandemic, coupled with the problem of locusts, drought in Southeast Asia and other factors, has increased the volatility of international food prices.”

All of this puts Australia’s bountiful wheat export in the right place as sales of the grain to China and other countries, including Indonesia and Vietnam, hit record highs.

Latest preliminary data from the Australian Bureau of Statistics (ABS) for February, released on Wednesday, showed its A$1.3 billion (US$990 million) in exports of cereals, including wheat, for the month was the highest monthly export on record.

Australian grain growers delivered a record wheat harvest and near-record total winter grain harvest last season and there are promising early signs as farmers start making plans to plant this year’s crop

Peter Knoblanche

“The driver was wheat and meslin, which also reached a monthly high, aligning with reports of Australia’s second largest wheat crop on record,” the ABS said.

Australia’s sales of wheat to China remained strong, although they have fallen after the record high sale in December worth A$248 million (US$189 million), which was Australia’s largest-ever monthly wheat export to any single country.

The latest Rabobank Rural Confidence Survey this month said that despite the pandemic, last year was a major turnaround in fortunes for many Australian farmers, particularly the recovery from drought.

“Australian grain growers delivered a record wheat harvest and near-record total winter grain harvest last season and there are promising early signs as farmers start making plans to plant this year’s crop,” Rabobank Australia chief executive Peter Knoblanche said.

This increase in Chinese domestic wheat consumption is driven by stronger feed demand, something which should not be too surprising, given the strength that we have seen in the domestic corn market

Warren Patterson

Overall, however, for February as a whole, Australia’s exports to China fell against January, driven by a smaller quantity of iron ore shipped mainly due to seasonal cyclones and adverse weather in the iron ore-producing regions in Western Australia.

China’s big wheat purchases, though, are not limited to Australia, and according to China customs, imports in the first two months of the year from Canada rose even more than Australia’s, an increase of nearly 3,000 per cent compared with a year ago.

Wheat shipments to grain-hungry China surge as total 2020 exports just shy of record high

All this points to a global concern over the potential shortage of wheat and high prices, especially given continued demand from China.

“This increase in Chinese domestic wheat consumption is driven by stronger feed demand, something which should not be too surprising, given the strength that we have seen in the domestic corn market,” said ING Economics head of commodities strategy Warren Patterson.

Earlier this month, the global wheat research collective, Wheat Initiative, kicked off its first workshop to investigate how to combat wheat crop loss due to heat and drought with input from Germany, France, Britain, Canada, Australia and China.

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