SPOKANE — The potential market for soft white wheat in China is more than Pacific Northwest farmers produce, and the world’s most populous nation is already starting to increase its purchases, industry representatives say.
The amount of soft white wheat China imported has surged in recent years. In the 2015-2016 marketing year, China imported 52,000 metric tons. In 2016-2017, imports increased to 228,000 metric tons. In 2017-2018 so far, the nation has bought 271,000 metric tons.
“The number-one reason is the quality of the wheat itself, especially for flour,” said Jeff Coey, U.S. Wheat Associates regional assistant vice president for China and Taiwan. He spoke by teleconference during a Washington Grain Commission board meeting last week.
“There’s no substitute for our soft white. It’s extremely sought after,” he said.
Under China’s tariff rate quota allocations, 90 percent of import purchases are made by the Chinese government and 10 percent by private sector importers, such as individual mills.
China is the largest wheat market in the world, using 118 million metric tons last year. Farmers are encouraged to grow more wheat than is used and receive a minimum support price of $10.56 per bushel for Chinese white wheat.
Virtually half of the world’s stocks are in China, but much of it is high-priced and of “dubious quality,” Coey said.
Interest in baking in China is growing as residents become wealthier and eat more baked goods, Coey said.
That, he said, represents a “huge potential market.”
Meanwhile, Chinese wheat production, while adequate for traditional noodles and dumplings, doesn’t match the new demand for products such as pizza, hamburger buns, cakes and pastries.
Chinese millers understand the value of U.S. wheat, but must work within the government policy. Food security in staple grains such as wheat and rice is the top priority for policy makers, Coey said. The national vision is to become self-sufficient in wheat.
“They view imports as a threat to food security rather than as a back-up supply,” he said. “This is unlikely to change in the near future.”
If China bought all of the foreign wheat allowed under its quota, it would become the world’s second biggest wheat import market and still be 92 percent self-sufficient.
That’s still too high for Chinese policy makers, who don’t want to depend on outside sources for food staples, but represents huge potential for U.S. growers, he said.
“The potential of just that 8 percent ... with China is more than what we produce,” said Mike Miller, chairman of the Washington Grain Commission and U.S. Wheat Associates. Three million metric tons was produced this year in Washington, and 5.6 million metric tons was produced in the Pacific Northwest.
Whether the demand from China would be consistent is a concern, Miller said. The commission will encourage U.S. Wheat to continue to work to break down trade barriers in the market, he said.
China’s wheat trade policies are the subject of a U.S. Trade Representative complaint before the World Trade Organization, which is supported by U.S. Wheat and the National Association of Wheat Growers.
The USTR rarely takes on cases it cannot win, but whether Chinese policy will ultimately comply with the WTO’s findings is another matter, Coey said.
China also faces agriculture concerns that include less arable farmland, smaller farms and low efficiencies, stretched water resources, soils damaged by overuse of chemicals, poor wheat quality and lagging private investment.
Without a clear title to the land, farmers tend to neglect or abuse the soil, and banks will not lend against the value of the property as security, Coey said.
“If you want to see what happens to wheat quality in a system where the farmers are incentivized by yield and yield alone, then look at Chinese wheat, because that’s what the situation is there,” he said.