China has indicated that ‘enhanced inspections’ on Australian wheat will be enforced going forward. It is another shot across the bow amid increasing tension with Beijing.
It is no doubt a political move, another warning that pushing China too hard on COVID, South China Sea, Hong Kong, Human Rights, spies/consular officials etc. etc. will not be tolerated by the Party.
At this stage is does not affect our wheat business into China. But it does make anyone wanting to do business with China very nervous. There is something like 700kmt already booked for Nov/Dec delivery into Chinese ports with 1.5mmt average yearly demand (ABS). There is nothing like a cargo getting rejected at port to put a dent in your PnL.
The immediate effect has been a spike in US futures as the US will be banking on the fact that demand will swing to them. The Chinese have been on a recent buying spree, particularly on US corn, beans and wheat. Globally, demand for wheat is seen as strong as countries look to be food secure with the threat of COVID 2.0 hanging around.
Hopefully, it is all just a storm in a teacup. Australia’s photo-sanitary protocols are second to none and I would be sure that bulk handlers here would stand by their practices. But if China – or any customer – wanted to find a problem, they would.
This is not an import tariff (i.e. barley), and as such doesn’t directly restrict our access into China. It is however a threat and needs to be watched.
The week ahead….
Steady as she goes. The world is getting more comfortable with production and with record production and carryout, I suspect the market will flatten out from here.
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The politics of wheat
It is no doubt a political move, another warning that pushing China too hard on COVID, South China Sea, Hong Kong, Human Rights, spies/consular officials etc. etc. will not be tolerated by the Party.
At this stage is does not affect our wheat business into China. But it does make anyone wanting to do business with China very nervous. There is something like 700kmt already booked for Nov/Dec delivery into Chinese ports with 1.5mmt average yearly demand (ABS). There is nothing like a cargo getting rejected at port to put a dent in your PnL.
The immediate effect has been a spike in US futures as the US will be banking on the fact that demand will swing to them. The Chinese have been on a recent buying spree, particularly on US corn, beans and wheat. Globally, demand for wheat is seen as strong as countries look to be food secure with the threat of COVID 2.0 hanging around.
Hopefully, it is all just a storm in a teacup. Australia’s photo-sanitary protocols are second to none and I would be sure that bulk handlers here would stand by their practices. But if China – or any customer – wanted to find a problem, they would.
This is not an import tariff (i.e. barley), and as such doesn’t directly restrict our access into China. It is however a threat and needs to be watched.
The week ahead….
Steady as she goes. The world is getting more comfortable with production and with record production and carryout, I suspect the market will flatten out from here.
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Click on graph to expand
Click on graph to expand
Data sources: USDA, Reuters, ABS, Mecardo
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Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
Listen to the podcast
Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.
Research: Analysis of the Australian sheep flock
In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making.
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We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.