June 21, 2018 / 2:49 AM / a year ago

Wheat petite: China's wheat output set to drop sharply in wake of bad weather

BEIJING (Reuters) - China’s wheat output could drop as much as 20 percent this crop year after bad weather hit fields in major growing areas, likely boosting imports by the world’s top producer and consumer of the grain, traders and an analyst said.

FILE PHOTO: A harvester reaps wheat crop in a field in Chiping county, Shandong province, China June 3, 2017. Picture taken June 3, 2017. REUTERS/Stringer

Increased Chinese demand for wheat cargoes could pile more upward pressure on international prices for the commodity, which have already soared nearly 15 percent since early April on worries over tight global supplies.

The festering trade spat between Washington and Beijing means that U.S. exporters would probably be unable to capitalize on increased Chinese demand for wheat, traders said, leaving other major growers such as Canada and Russia set to take advantage.

“Domestic wheat output will drop significantly from last year,” said Wang Wenfeng, an analyst with Zhuochuang, a consultancy in the eastern province of Shandong.

She said that came after drought hit crops in parts of the key producing provinces of Shandong and Hebei during the growing stage, while heavy rains damaged crops during harvest in May and June in Henan and Anhui provinces.

“Wheat prices have jumped very fast since the new harvest hit the market, which will probably push up imports of quality wheat this year,” Wang said.

Wheat prices in Shandong [W-EXWDZH-GEN] have climbed 5 percent in the past two weeks to around 2,390 yuan ($369.19) per ton.

The China National Grain and Oils Information Center, a government think tank, earlier this month estimated that China’s wheat output would drop 3 million tonnes in the 2018/19 season from the year before to 126.73 million tonnes.

But two traders said that forecast may need to be updated, adding that the market widely expected production to drop from 15 to 20 percent.

To view a graphic on China's wheat output seen declining after harsh weather hit crops, click: reut.rs/2K357eO


Given the trade tensions with the United States and reduced supply from Australia following drought there, the Black Sea region and Canada remain the most viable sources for imports.

“American wheat supplies have dropped due to the trade conflict, and Australian wheat is too expensive. The only options left now are Canadian, Russian, and Kazakh wheat,” said a trader in Beijing. He declined to be identified as he was not authorized to speak with media.

The traders said Chinese importers had not yet been spooked by concerns following last week’s announcement of the discovery of an unapproved strain of genetically modified wheat growing in Alberta, Canada last summer. Japan and South Korea have suspended the sale of wheat from Canada in the wake of the news.

To view a graphic on China's wheat prices jumping after drought and harvest rains damaging the crops, click: reut.rs/2MGxm4I

Meanwhile, some Chinese farmers are deferring sales of wheat in expectation of higher prices, further crimping local supply.

“I’m waiting for the price to go up to 1.3 yuan per jin (2,600 yuan per ton) and if it stays at that level for some time, then I will sell,” said Li Guoyong, a wheat farmer in Hebei province who finished harvesting earlier this month.

Wheat prices in Hebei’s Shijiazhuang [W-EXWSHJ-GEN] were quoted at 2,360 yuan per ton as of Thursday.

Reporting by Hallie Gu and Dominique Patton; Editing by Gavin Maguire and Joseph Radford

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