Wheat exports to China triple in deregulated market
by Ray Brindal, Dow Jones Newswires, August 27, 2010
AUSTRALIAN wheat exports to China have already tripled this year, and demand from the world's most populous nation is expected to lift.
One major exporter said that demand from China, the world’s biggest grain producer, could be sustained.
Australian wheat exports to the world’s most populous nation in the nine months ended June 30 totalled 740,000 tonnes, of which 80% was in bulk and 20% in containers, or about 7% of total wheat shipments, official data showed.
That compared with 238,000 tonnes in the full marketing year ended September 2009.
Exporters cited several factors underpinning a trade that has generated about $230 million in export income already this year, including difficult internal Chinese logistics, the qualities of Australia's white wheat that allow it to be favourably blended with sometimes variable local grades and the positive effects of deregulation of bulk wheat exports from Australia in 2008.
Previously, flour mills in China didn't have direct access to Australian wheat, as the former export monopoly operator, AWB, only sold wheat to Cofco, the Chinese government's grain importer.
Said Tom Puddy, wheat manager for the Grain Pool marketing unit of Co-operative Bulk Handling: “Now with deregulation, this is a clear example of customers in certain markets having access to buy Australian wheat, unlike before.”
CBH accounts for about 35% of the export trade to China so far this year, or about 250,000 tonnes, with AWB shipping a little more than 300,000 tonnes. Other companies involved include GrainCorp in both the bulk and container trade, the Elders Toepfer Grain joint venture and Glencore Australia.
The increase in Chinese buying this year chiefly reflects their wish to replenish inventories, which have been sold down in recent monthly domestic tenders.
Moreover, private buyers have been issued with import quotas allowing them to buy direct from Australian suppliers without going through Cofco, Mr Puddy told Dow Jones Newswires.
AWB general manager for commodities, Mitch Morison, said Australia cargoes, mostly of wheat that has about 10% protein levels, are being shipped chiefly into Guangdong province in the south and, to a lesser degree, Shandong province in the north.
It's cheaper for the Chinese to import wheat sometimes than to haul internally, particularly in the south, where there's consistent demand, he said.
There are also internal quality issues, given the sometimes highly variable milling yield and mixed qualities of some domestic wheat grades, which are blended with imported Australian wheat, he said.
“We would expect to see over time a continual increase in Chinese demand for imported grain,” Mr Morison said.
Some of Australia's biggest customers in Asia, particularly in Malaysia, have interests elsewhere in the region, including in China. These regional clients now want to import in their own right and want licences from Cofco, he said.
“There will be growth of the private sector demand for quality wheat” in China, he said.
AWB sells to Cofco, which co-ordinates all imports and issues licences to import, he said.
Beginning at the time of its former life as the Australian Wheat Board, today’s AWB has had a long trading relationship with Cofco, he said.
Indonesia remains the biggest buyer of Australian wheat, taking 2.2 million tonnes in the nine months ended June 30, or 21% of total exports, compared with 2.6m tonnes, or 18% of total exports that totalled 14.57 million tonnes in the last marketing year ended September 30, 2009.
Mr Morison said demand is rising from Indonesia as new mills come on line, and from Sudan and Yemen.
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