Wheat: “… In Their Word’s…”

While we have already discussed China’s drought in an earlier article, this is a follow-up to it, as the world food organisation released an alert on the possible loss of the Chinese wheat crop.  China, and now the world is taking this topic serious.

The following quotes are on the topic of Wheat and the impact on China and soon the world.  China is the world’s largest producer of wheat.  The price of wheat is climbing monthly in China.

They produce 95% of their wheat crop during the fall through spring period.  This crop needs rain in the fall, snow cover through the winter and then rains in the spring.  The wheat is harvested in June.

The 8 primary Providences reported to be experiencing the worse of the drought currently affects 80% of the Chinese total wheat production.  The drought has directly affected 35% of the wheat crop in this area so far.  The wheat has not received the typical rain, or the later snow that is needed to keep it insulated from the extreme cold temperatures of winter.

China, as the world’s largest producer of wheat, has few locations it can turn to in a time of crisis to purchases enough volume to meet their own internal needs, if a harvest fails.  The destruction of the Russian wheat harvest via fires last fall and the flooding of the Australian wheat harvest in January have cut the number of nations that could provide China with emergency food down to one.

Politics will be picking up on this fact sooner rather than later.  Watch for the US / China trade imbalance to shrink significantly in the coming months as US buys less Chinese, while they are forced to buy rapidly more expensive commodities in the US.

“China’s grain situation is critical to the rest of the world — if they are forced to go out on the market to procure adequate supplies for their population, it could send huge shock waves through the world’s grain markets,” said Robert S. Zeigler, the director general of the International Rice Research Institute in Los Baños, in the Philippines. “They can buy whatever they need to buy, and they can outbid anyone,” Mr. Zeigler said. China’s self-sufficiency in grain prevented world food prices from moving even higher when they spiked three years ago, he said.

“The drought has been bad enough for long enough in China that the crop is not likely to be what it was in 2010,” said Alex Bos, a London-based analyst at Macquarie Bank. “The thing with winter kill is there’s no way you can quantify any of the damage until the crop comes out of dormancy.”

“Substantially below-normal rainfall since October 2010 in the North China Plain, the country’s main winter wheat producing area, puts at risk the winter wheat crop to be harvested later in the month of June. Low precipitation resulting in diminished snow cover has reduced the protection of dormant wheat plants against frost kill temperatures (usually below -18°C) during winter months from December to February. Low precipitation and thin snow cover have also jeopardized the soil moisture availability for the post-dormant growing period,” the FAO said.

“Temperatures are beginning to heat up in North China, coaxing wheat out of dormancy,” Gail Martell, an agricultural meteorologist at Whitefish Bay, Wisconsin-based Martell Crop Projections, wrote in a report. “Rain is needed soon.”

“Provincial authorities should hold officials accountable if drought relief work is not well done,” said Liu, deputy secretary of the Shandong Provincial Committee of the Communist Party of China.

Sources for Quotes of Interest

  • Bloomberg

China, Largest Wheat Grower, Facing Threat of Drought

  • Reuters

Wheat China FAO

  • CNBusinessNews

East China Wheat Basket Braces for worse drought in 200 years

  • NY Times

UN Food Agency issues warning on china drought

  • FOA Global Information and Early Warning System on Food and Agriculture

China: A severe winter drought in the north china plain may put wheat production at risk

  • Black sea grain

Wheat to top $9 a bushel, and soybeans to near $16

Filed under: China, Commodities, Communications, Economics, Food Crisis, Global Macro Tagged: Chinese Imports, droughts, Early Warning, famines, FOA, Food Alert, Grains, wheat

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