Slump in China's State wheat reserves sparks concern over need for US imports

By Li Xuanmin Source:Global Times Published: 2018/8/8 21:03:40

Slide due to domestic factors, no need for US imports: experts


Workers unload a truck full of grains at a government storage in Ji'an, East China's Jiangxi Province on August 1. Photo: VCG

A sharp decline in China's wheat reserves in recent months sparked speculation that China might have to expand imports from the US, a sign of the nation's reliance on US sources. But industry insiders on Wednesday said the slide was due to domestic factors and there was no need to look for US crops to compensate for declining State wheat purchases.

Also, Chinese people are eating less staple food as their diets change, and farmers have begun to cultivate specific wheat for liquor production to replace US imports, which will further reduce demand for alternative sources, they noted.

China's wheat purchase volume in the main producing areas stood at 36.97 million tons from January to July, down 18.36 million tons from the same period last year, according to a post on the official Weibo account of the State Grain and Reserves Administration.

In one of the top wheat provinces - Central China's Henan Province - the State purchase volume was 7.79 million tons, down 9.65 million tons year-on-year.

Industry insiders said the slide reflected a cut in the minimum purchase price this year in a bid to deplete mammoth stockpiles.

"This year, the State planner set the minimum purchase price below the market price, so most farmers... have adopted a 'wait-and-see' attitude on expectations of a future price surge," Li Guoxiang, a research fellow at the Chinese Academy of Social Sciences' Rural Development Institute, told the Global Times on Wednesday.

Li said the price cut was meant to reduce excessive stockpiles, leaving the market to achieve a supply-demand balance.

It is estimated that there will be 126.8 million tons of wheat in State reserves this year, said a report on chinagrain.cn.com. That compares with annual consumption of about 100 million tons in China, Reuters reported.

The lower price has also prompted producers to sell their crops to private buyers such as flour mills, feed crop plants and other farms that offer more money, rather than to government-owned grain storage centers, a villager surnamed Wang from Laixi, East China's Shandong Province, told the Global Times on Tuesday.

Some farmers have shifted from cultivating wheat to other more profitable crops. Combined with this year's weather damage, this trend has led to lower output.

For example, Wang said that much farmland in his hometown was now being used for greenhouses producing vegetables and fruit, which offer better profits than wheat.

The shrinking output has also raised market concerns over whether China can meet domestic demand for wheat, which accounts for 40 percent of its grain consumption. Otherwise, it may have to rely on large wheat producers including the US, which has launched a trade war with China.

Li dismissed such worries by noting China's high inventories, which he said would be adequate in the short term.

More importantly, in the long term, "consumers' diets are becoming more healthy and balanced, which will reduce the demand for staple foods such as wheat," Li noted.

Ma Wenfeng, a senior analyst at Beijing Orient Agribusiness Consultancy, told the Global Times on Wednesday that China is "self-sufficient" in its main food crops such as wheat. The nation is the world's largest producer of wheat.

Last year, China imported about 4 million tons of wheat, equivalent to 3 percent of domestic output.

"There are some specific types of wheat for brewing that distillers must import from countries like the US, but several years ago, farmers began to cultivate such crops with government policy support," he added.

Cao Siqi contributed to this story


Newspaper headline: Slump in State wheat reserves sparks concern


Posted in: INDUSTRIES,BIZ FOCUS

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