China Dominates Global Wheat Market With Its Record Stocks In 2022-23

By Amitabha Sen

The World’s second largest economy, China is currently holding more than half of the global wheat stocks leaving much behind the combined stocks of the US and the European Union’s 27 member states. If excluded China, the global stocks can take care less than two months consumption. This is revealed in the World Bank’s food security report.

The horrifying “Great China Famine” in 1959-61 during the Mao Zedong era still haunts the country’s most powerful leader today , Xi Jinping, about the Food Security of over 142 crore  people in the country . Further collapse of the global food supply chains over the prolonged Russia – Ukraine war is a different issue but the fact remains that at the end of the current 2022-23 marketing year (July-June) the global wheat stocks are estimated to be 267 million tonnes of which over 50 percent is held by China. Of the remaining stocks, the US and the EU together hold another 20 percent. The balance about 25-30 percent is held by the rest of countries in the world.

“If China is excluded from global totals , projected stocks for 2022-23 are 58 days of use“ which is the lowest level in the last one and a half decades when global wheat stock stood at 53 days in 2007-08. On the other hand, if stocks held by only major exporting countries are considered, the 2022-23 MY at 26.3 days of use, the lowest fall since 2007-08 MY when stocks stood at 25.4 days of use.

“Such tightness of global stocks”, the report says “suggests that price volatility will continue to remain higher than in the past 10 years. In addition, in the context of tight global stocks, it is likely production shortfalls in a major wheat producing region would increase prices and price volatility”.

China is at its peak in the international import market and the projected imports are estimated to be 12 million tonnes this year – near to 12.5 million tonnes imported in 1995-96. But significantly despite holding more than 50 percent of global wheat stocks, the domestic grain prices in the country are high in spite of country’s “minimum support price and reduced auction activity amidst uncertainty surrounding the government’s COVID-19 policies”, according to a Grain report of the USDA. The report attributes the falling prices – below $400 per tonne – in the international wheat market over last couple of months to “ample exportable supplies from Australia, The European Union and Canada”.

China’s is trying to make best use of the competitive international prices and importing large volumes of both milling and feed quality wheat. Consecutive three years of record wheat crops has led China for “aggressive purchase” of wheat from Australia. China’s wheat imports from Australia in the first 8 months of the current marketing year was 66 percent higher than comparable period in MY 2022-23. Canada is not behind. Its exports of hard red milling wheat shot up as high as 83 percent during this period.

Presently, many countries in Africa are having foodgrains crisis. Pakistan is also having serious shortage of wheat. China with its high wheat stocks is better positioned   to supply foodgrains to these affected countries and earn political mileage as against its other competitors, especially the US. Xi Jinping is therefore showing confidence in dealing with the problems of the crisis ridden African countries. (IPA Service)

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