China’s first major purchase of U.S. wheat since the trade war broke out has farmers hopeful the door to more exports to that Asian nation is opening.
U.S. Wheat Associates received confirmation from export companies that an unidentified buyer in China recently purchased 130,000 metric tons of soft white wheat, a market class primarily grown in the Pacific Northwest.
This is the first substantial order from China since March 2018. A private purchase of 32,000 metric tons of hard red wheat and 8,000 metric tons of soft white wheat was made in the 2018-19 marketing year.
Imports of U.S. soft white, hard red spring and hard red winter wheat classes into China were trending upward but abruptly ended in March 2018 when China clamped retaliatory tariffs on U.S. wheat and other commodities.
“It is a significant purchase,” said Steve Mercer, vice president of communications for U.S. Wheat, the overseas marketing arm for the industry. “Soft white is definitely a class that fills a specific need ... that the Chinese industry had before. Yet to be seen is whether this is a trend or a one-off. We hope it’s a trend.”
China had purchased nearly 2.5 million metric tons of U.S. wheat during the 2016-2017 and 2017-2018 marketing years.
Since then, Canada has exported more spring wheat to China, Mercer said.
U.S. Wheat hopes China will meet its obligations to buy foreign wheat under a tariff rate quota. China lost a case at the World Trade Organization, acknowledged that it had not met that quota, and decided not to appeal the case.
“That would be huge,” Mercer said. “That is 9.6 million metric tons. It doesn’t have to all be from the U.S., clearly, but a significant potential level.”
Last fall, U.S. Wheat estimated that $300 million was lost annually as a result of China not meeting the quotas.
China has a lot of wheat in storage, but it’s not necessarily the class of wheat the U.S., Canada or other nations can provide, Mercer said.
“We are glad for this purchase ahead of the latest round of trade discussions between the U.S. and China,” Doug Goyings, U.S. Wheat chairman and a wheat farmer from Paulding, Ohio, said in a press release. “It remains to be seen if this is the start of a return to steady purchases by China. In the long run, that is what our farmers need along with good progress toward an agreement and continued support for the rules-based trading system that has given them access to more markets.”
U.S. Wheat will continue to work with millers, bakers and the Chinese government, Mercer said.
“If the playing field were level, if there weren’t those tariff restrictions and, boy, if that tariff rate quota was fulfilled, we definitely would be looking at China as a very strong potential market for U.S. wheat in many types of wheat classes,” Mercer said.