China has plentiful supplies of wheat after a good harvest this summer with minimal pest and disease damage, and authorities are adding to wheat reserves in order to prop up prices. Wheat imports are expected to decline during the 2017/18 market year as importers buy mainly to fill deficits of certain varieties still not produced in adequate volumes in China.
China's National Bureau of Statistics estimated the 2017 winter wheat output (harvested during the summer) at 127.35 million metric tons, up 1.07 mmt (0.84%) from last year. The National Grain and Oils Information Center estimates total wheat output at 129.85 mmt for 2017/18, also up 1 mmt from last year. NGOIC estimates wheat consumption at 103.7 mmt, down 4 mmt from last year.
Reports from provinces indicate that this year's incidence of wheat scab and pest damage is down sharply. There have been few problems with lodging, mold and sprouting that were widespread during the last several years when heavy rain storms occurred at wheat harvest time.
Chinese authorities are buying up wheat to resist downward pressure on prices due to plentiful supplies. Shandong Province launched its minimum price procurement program in three prefectures on July 6. Hebei Province launched its program in all its major wheat-producing areas the same day. Jiangsu, Anhui, Henan, and Hubei Provinces had already started their minimum price purchase programs in June. Procurement at minimum prices will continue through September 30.
The Agricultural Development Bank has allocated 135 billion yuan ($19.6 billion) to finance summer grain procurement (wheat, early rice, and rapeseed), 20 billion yuan more than last year. As of June, purchases financed by the government's Agricultural Development Bank constituted 54% of all wheat purchases.
Wheat procurement is finishing its peak period. As of July 15, 2017 the Grain Bureau reported that 46.7 mmt of wheat had been procured so far, 12.1 mmt more than the same period last year.
Average procurement prices for wheat reported by the Grain Bureau covered a wide range, from 2100 to 2710 yuan/metric ton ($8.28-$10.69 per bushel). The lowest prices reported in each province are under the minimum of 2360 yuan/mt ($9.30 per bushel).
As of early July, the Chinese government's temporary reserve of wheat was reported to be 56-to-57 mmt. That is 17-to-18 mmt higher than last year at the same time.
The rally in international wheat prices last month due to drought concerns in the U.S. narrowed the gap between Chinese and global wheat prices. The estimated C&F price of US Soft Red Wheat arriving in China is 2120 yuan/mt, up 303 yuan from last month. That price is still 460 yuan less than the price of domestic Chinese wheat, but the gap narrowed from 767 yuan/mt last month.
NGOIC lowered its estimate of China's 2017/18 wheat imports to 3 mmt this month, down 300,000 metric tons from last month's estimate. NGOIC's estimate is 1.25 mmt less than 2016/17 imports.