Agriculture & Food

According to data released by the General Administration of Customs recently, customs data shows that China imported 1.68 million tons of wheat in April this year, an increase of 141% year-on-year. The cumulative quantity of imported wheat in China from January to April was about 6.03 million tons, an increase of 60.9% compared to the same period last year. What are the reasons for the surge in wheat imports? Will it have an impact on the domestic market? How to ensure the safety of the domestic wheat industry? It is a common concern in current society.

The widening price difference between domestic and international wheat is the main reason for the surge in wheat imports, "said Zheng Wenhui, a researcher at the Guangdong South China Grain Trading Center. Customs data shows that in April, the dutiable price of imported American soft red winter wheat was around 2490 yuan/ton, which is about 390 yuan/ton lower than the average price of domestic wheat in Guangdong port. The inversion of domestic and international wheat prices has existed for a long time. Since last year, due to factors such as high wheat production in major producing countries such as Australia, Canada, and Russia, shrinking liquidity in the United States, and the signing of the Black Sea port export agreement, international wheat prices have significantly decreased, with a decline exceeding domestic wheat prices, further widening the price gap between domestic and international wheat. Customs data show that, taking the price of American wheat as an example, the price of the main wheat contract in Chicago futures market has dropped from 913 cents/bushel to 606 cents/bushel, a decline of 33.5% since the establishment of a decline in September last year. The decline in domestic wheat prices has continued since December last year, from 3250 yuan/ton to the current 2700 yuan/ton (the third class average market value), down 17%.

With the significant decline in wheat prices, the price difference between wheat and corn has narrowed, and the demand for wheat substitution has increased. This is an important reason for the increase in wheat imports. Zheng Wenhui predicts that the main import of wheat in the first half of the year will be Australian wheat for feeding purposes, and high gluten wheat will be the main import in the second half. According to customs data, in the first four months of this year, 3.6 million tons of wheat were imported from Australia, 1.1 million tons from Canada, 770000 tons from France, and 475000 tons from the United States. Compared to other countries, Australia's wheat transportation costs are relatively cheap, procurement is cost-effective, and imports account for the largest proportion. According to some companies, the wheat imported last year has not been fully digested, and it is expected that the annual wheat import volume this year will not be much higher than last year.

China is a major global producer and consumer of wheat, but not a strong producer of wheat. The wheat harvest has been abundant year after year, with sufficient inventory and complete self-sufficiency, but the supply of high-end high-quality wheat is insufficient. Imported wheat mainly meets the demand for high-quality wheat variety adjustment, with a small portion flowing into the feed industry. Customs data shows that since 2020, China's wheat import volume has significantly increased compared to previous years. In 2021 and 2022, the wheat import volume has exceeded the import quota of 9.636 million tons for two consecutive years. It is understood that due to the higher purity and stability of imported wheat varieties compared to domestic high-quality wheat, some flour mills in the south have formed a certain demand habit for imported wheat.

The increase in wheat imports has little impact on the domestic market, but it will have a boosting effect on the rise and fall of domestic wheat prices. Zheng Wenhui believes that the decline in domestic wheat prices is mainly due to the decline in grain demand that business entities have previously increased to cope with various uncertainties both domestically and internationally, leading to a feeling of "excess" in the market's grain supply, which has led to increasingly consistent bearish expectations among various entities, further accelerating the decline. Customs data shows that some enterprises' inventory has decreased from the highest of 3 months during the epidemic period to 1 month. Traders have low purchasing intentions, most of whom hope to cut meat and leave the warehouse, while consumers' willingness to hoard grain has decreased. Under the combination of various factors, after a cumulative increase of 1000 yuan/ton in the past three years, the domestic wheat price has rapidly rebounded this year, dropping by about 550 yuan/ton. Under the general trend of downward wheat prices, the increase in wheat imports has added another bearish reason to the market, playing a role in accelerating the decline.

It is worth noting that the proportion of wheat imports to production in China has significantly increased, and with the increasing flexibility of wheat feed substitution, the import proportion of coarse grains such as corn is also increasing. The correlation between domestic and foreign wheat prices will greatly increase, and the impact of the international market on the domestic market will increase. Zheng Wenhui believes that in order to ensure the safety of the domestic wheat industry, it is necessary to strengthen macroeconomic regulation, continue to implement wheat import quota management policies, and avoid a large number of low-priced wheat imports impacting the domestic market. Strengthen the monitoring and early warning of the international wheat market, pay close attention to the wheat production and trade policies of major wheat exporting countries, and prevent the adverse impact of price fluctuations in the international market on domestic wheat imports. To promote the diversification of wheat import sources and avoid import security risks caused by excessive concentration of wheat import sources.

Improving the international competitiveness of wheat is the key to responding to the impact of low-priced imported wheat and maintaining the security of the domestic wheat industry. Zheng Wenhui believes that in response to the dual constraints of resources and environment, high cost of grain cultivation, and low enthusiasm of farmers for grain cultivation in China's current production, it is necessary to increase policy support, fully mobilize the enthusiasm of farmers and main production areas to develop wheat production, ensure a stable and increasing wheat planting area, and strive for more wheat production; Accelerate the construction of high standard farmland, improve the scale, intensification, and mechanization level of wheat, and achieve cost reduction and efficiency increase; Implement the strategy of storing grain in technology and the action of revitalizing the seed industry, cultivate high-quality and high-yield wheat, develop the production of high-quality and specialized wheat with strong and weak gluten, and meet the consumption demand for high-quality wheat in China.