I first mentioned this news Thursday morning on Voices of Montana– a team of Chinese millers are visiting Montana today and Saturday. But here is what really stood out to me in the Montana Wheat and Barley Committee’s press release announcing the visit:
China has imported 131.6 million bushels of U.S. wheat to date for the 2013-2014 marketing year, compared to last year’s total wheat purchases of 12.6 million bushels and the five-year average of 14.3 million bushels.
The full press release from the committee is below.
Think about that though, a near 11-fold increase in US wheat imports into China, and the year isn’t even done yet.
China can no longer depend upon exports as the main driver of growth. Rapidly rising wages—15% to 20% a year in coastal provinces—are eroding the labor-cost advantage that lifted exports.
For countries whose economic fate—and GDP—are tied to commodity exports, the China Chill is a cold wind indeed. China will still be the biggest market for industrial commodities—but without the same accelerating growth in demand. Meanwhile, global production capacity has been greatly expanded to service the supercycle. Just as China did so much to fuel the supercycle, so its slowdown, more than anything else, is what has brought the supercycle to an end. The change is registered in prices. Copper prices are down 30% from their 2011 peak, iron ore 32%. Overall, the IHS non-oil commodity index is down 27% since 2008.
The end of the supercycle also means that commodities no longer march in lock-step with each other. Aluminum prices, for instance, are almost back to where they were at the beginning of 2004. Coal prices in China are down 40% since their peak in 2008. On the other hand, iron ore prices are still much higher than they were a decade ago, and in the last weeks have ticked upward in response to new Chinese trade data indicating increased commodity imports.
Full press release from the Montana Wheat and Barley Committee
GREAT FALLS, Montana — In the past two months, China has purchased almost nine times the amount of wheat they usually purchase annually from the United States, according to U.S. Wheat Associates.
It is clear that China is turning to the United States this year to supply its increasing needs for wheat. To help Chinese millers take advantage of competitive pricing and high quality U.S. wheat supplies, Montana Wheat & Barley Committee is helping sponsor a visit to Montana by a team of Chinese milling executives and purchasing managers.
On Aug. 9-10, six team members will travel to Montana to tour a grain facility and talk directly with producers on their farms. Discussions will help these managers build knowledge about the U.S. wheat marketing system and about the benefits of Montana wheat for specific Chinese end-products. The trade team will also visit North Dakota, Oregon and Idaho.
“These team members are in charge of final purchasing decisions for their mills and are looking for information on crop quality and grain standards,” said U.S. Wheat Regional Vice President Matt Weimar, based in Hong Kong, who will accompany the team. “China is looking to the United States to help bolster wheat supplies, and this team will learn how to use the U.S. grain marketing system to further increase the value of purchases of the high quality wheat needed to meet their consumers’ demands.”
In addition to an increasing preference for Western-style wheat foods and high protein wheat, China needs to replace stocks released from their national grain reserve, and then their domestic winter wheat crop had quality problems after persistent rains at harvest time last year. As a result, China has imported 131.6 million bushels of U.S. wheat to date for the 2013-2014 marketing year, compared to last year’s total wheat purchases of 12.6 million bushels and the five-year average of 14.3 million bushels.
Montana Wheat and Barley Committee will provide information about production and crop quality as well as a tour of the State Grain Lab. “Montana wheat quality speaks for itself through quality testing and producer performance, but the Montana Wheat and Barley Committee is proud to host foreign trade teams each year to show how the state’s wheat is grown and its quality is preserved,” said Kim Falcon, Executive Vice President of the Montana Wheat and Barley Committee.
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Trade Team Travels to United States as Chinese Wheat Purchases Soar