China’s diminishing appetite for grain poses a danger to the global market

(Times Of Update) — China’s appetite for overseas wheat and corn is declining rapidly, potentially adding pressure to global grain markets accustomed to robust demand from the top importer global agriculture.

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Shoppers in China have not been seen making major purchases for a few months, according to a number of traders. With domestic prices so low, this trend is expected to continue in the third quarter, they said, declining to be identified discussing sensitive trade issues.

Global forecasters such as the International Grains Council and the U.S. Department of Agriculture still believe Chinese purchases will be strong for this year and next. If imports fall, a key pillar of demand, affecting farmers in the Americas, Europe and Australia, would be compromised.

China’s apathy towards imports is due to a sluggish economy and consecutive bumper harvests. The government was forced to stockpile wheat and corn to support local farmers, while overseas corn shipments were restricted or even canceled to support the domestic market.

That is likely to alarm China’s foreign suppliers, particularly after Turkey, the world’s fifth-largest wheat buyer, dealt a blow to demand last week by suspending grain imports for four months to protect local producers. Low consumption, for similar reasons, from China, the second largest importer, would only add to market nervousness.

“The economy is really bad and overall demand for society as a whole is collapsing,” said Ma Wenfeng, a senior analyst at BOABC, a consultancy in Beijing. “The government wants to increase grain prices and increase agricultural incomes, to stimulate demand in rural areas. Rather than buying cereals abroad, it is better to buy locally.

China has long been a massive buyer of soybeans, mainly to feed its vast hog herd, and is actively booking more shipments. But the explosive growth of wheat and corn, also among their uses as livestock feed, only began with diplomatic promises made to the United States during the trade war with the Trump administration.

Imports of wheat and corn from January to April were actually higher than last year. That makes the sudden drop in activity all the more surprising and could leave international markets vulnerable to a decline if China actually adjusts its overseas purchasing strategy.

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In the last full week of May, the United States had only 86,300 tons of corn left to ship to China for the current marketing year that ends in August, significantly lower than the 631,600 tons last year, according to the USDA. For next season, there will be no exceptional sales of corn – which has not happened for five years – and only 62,500 tonnes of wheat.

Although the situation could improve quickly, particularly if poor weather conditions affect harvests, China’s grain glut is unlikely to decline dramatically as long as consumption remains this low. Besides, another…