Issue 30
June 2000
 

Prairie Grains is the official publication of the Minnesota Association of Wheat Growers, North Dakota Grain Growers Association, South Dakota Wheat, Inc. and the Minnesota Barley Growers Association.

Copyright
Prairie Grains Magazine
June 2000

Wheat World

China forecast to increase 2000/01 wheat imports
According to a recent USDA agricultural attaché report, China's 2000-01 wheat production is expected to reach 107 million metric tons (mmt), down from the 1999-00 estimate of 113 mmt.  Poor wheat growing conditions in late winter and early spring, combined with lower domestic support prices, led to the attaché's lower wheat production estimate.  Consequently, the attaché report forecast China's 2000-01 total wheat imports at 3.0 mmt, up from the 1999-00 estimate of 600 thousand metric tons.  Furthermore, the attaché expects nearly 1.5 mmt of the 2000-01 imports to be sourced from the U.S.

World's largest wheat producer, major market mover
The U.S. produces roughly 2 billion bushels of wheat each year, exporting over half of it.  This dependency on exports is a big reason why U.S. wheat groups including the Minnesota Wheat Research and Promotion Council have been focusing a spotlight this spring on the need for congressional approval of permanent Normal Trading Status for China (PNTR).

China made trade concessions within the past year to gain U.S. support for China's entry into the World Trade Organization, as well as PNTR status. Under NTR, imports from a trading partner are charged only the most favorable tariff rates granted by the United States. Products from countries not eligible for NTR are charged significantly higher rates of duty. PNTR would not subject China to annual critiques of its trade status with the U.S. However, China will be subject to WTO rules once it gains entry into the organization later this year.

Since 1990, China's average wheat consumption has increased about 40 million bushels per year, which is about one half of Minnesota's total wheat crop, according to David Torgerson, executive director of the MWRPC. "This increasing consumption does not always translate into increased imports, because it has sometimes been offset by their own production," says Torgerson.  "However, over the last ten years they have imported about 255 million bushels per year, of which 80 million bushels has come from the U.S." 

U.S. Wheat Associates (the U.S. wheat export promotion organization) estimates that if American farmers could earn just 40 percent of potential Chinese business, total U.S. wheat exports could expand by 10%, says Torgerson. That's significant, given the fact that every million ton of wheat exported means about five cents to the per-bushel price of wheat in the U.S.

China is the world's largest wheat producer but also a major importer that can be a major market mover, says Torgerson.  Since 1990, China's annual wheat imports have fluctuated between 18 million bushels and 600 million bushels. When China needs wheat, it can have a dramatic impact on wheat prices in the U.S. he says.

"For example, in 1991, China imported about 200 million bushels of wheat from the U.S., which is currently about 20% of our total wheat exports. This kind of wheat demand would have a significant impact on our prices and we should take the steps needed to ensure that we are in a position to sell wheat to them not only when they need it, but also in a sustained effort to gain a larger market share of their wheat import demand over the long term," says Torgerson.

Algerian buyers kick off summer trade teams
Representatives of Algeria's Office of Cereals visited the Northern Plains in early May, one of the first trade teams from at least 10 countries or global regions that will visit the region this summer.  Trade teams are typically sponsored by U.S. Wheat Associates and are comprised of representatives of government or private grain procurement agencies, flour mills, bakeries and pasta manufacturers.  The visits allow a greater understanding of the U.S. wheat production, handling, and marketing system, and often include stops at area farms and elevators, research facilities, grain inspection labs and processing plants, as well as visits with grain merchandisers, the Minneapolis Grain Exchange, and the Port of Duluth.

Algeria is the world's largest durum import market and fourth ranking importer of all wheat combined, according to the North Dakota Wheat Commission. Severe drought conditions since the beginning of the year have jeopardized an estimated 80% of the Algerian grain crop.  In light of the situation, officials suggest the Algerian government has already earmarked between $600-800 million to finance its increasing import needs. U.S. competition for the Algerian market comes largely from Canada for durum and from Germany and Argentina for bread wheat.

WHEAT WORLD is brought to you by the checkoff funded Minnesota Wheat Research and Promotion Council.