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Flooding in China A Boon for Foreign Agricultural Markets

09/10/2020

While the world has been focused on technology stocks, cryptos, precious metals etc, here is what has been going on – the wheat markets. Wheat imports by China from the US have increased a staggering 2,335% from last year. Why? 3 Gorges flooding impact which has now sadly reached Wuhan, which alone has a population of approx. 11 million residents.

https://twitter.com/i/status/1284024783303139328
Video from July 17, 2020 was taken from the Second Yangtze River Bridge in Wuhan, China. City of Wuhan in the background.

China has made big daily purchases this month, especially of soybeans, but also corn, cotton, sorghum, pork and wheat. US weekly wheat exports to China top August shipments; total US wheat inspections are currently up 30%. US wheat exports to China hit 90,106 million tons in the week ended Sept. 3.

Wheat sales chart-min

With that latest purchase, China’s total commitments for US wheat have now reached 1.47 million million tons in 2020-21, inching to a five-year high, according to an analysis of USDA data.

Global Wheat Production-min

China leads the world in global wheat production, but with the floods affecting over 54.8 million ppl as of July, and direct economic losses amounted to 144.43 billion yuan (about $20.66 billion).

The main wheat producing areas of China are Hebei, Shanxi, Henan, Shandong, Anhui, Hubei, Jiangsu, Sichuan, Shaanxi among others. Henan is the country’s largest wheat production area. A large province, accounting for about a quarter of the national wheat production.

All farming in the affected areas, including animal production, have been destroyed.

Since June, continuous downpours have lashed large parts of southern China, and the water in many rivers in the affected regions has exceeded warning levels.

Will China ease the tariffs on barley from Australia that they had increased months ago, in retaliation for their increased suspicion over China spying? Australia’s wheat production could reach 28.9 million tons in 2020/21, up by 91% from last year when they had suffered a drought.

In the meantime, farm areas of China that have not suffered flooding are holding back their wheat harvest this year rather than selling to the government and market, as they expect prices to soar and want to hold onto their stocks in case of shortages stemming from severe summer flooding or fallout from Covid-19.

Farmers there have already sold 49.3 million tons for commercial and state reserves as of Aug. 31 – 20% less than in the same period last year. China’s National Food and Strategic Reserves Administration stockpiles have sunk by almost 70% to only 6.2 million tons, when China’s total population amounts to 1.4 billion persons.