Loss of a Growing Market
Posted: Mar 25 2019
Loss of a Growing Market
China has been a growth market for the U.S. in recent years, especially for hard red spring wheat (HRS). It is the largest class imported by China with especially strong sales in 2016 when they were are second largest market. However, there have been no wheat export shipments to China in a year, due to retaliatory tariffs on many U.S. agricultural products, including wheat. There is little debate on the negative impact that China’s unfair trading practices and subsidies are having on many sectors of the U.S. economy, including agriculture, however, the loss of a top five spring wheat market in the current trade battle, is a big deal which directly impacts North Dakota farmers. While China would historically be considered a price sensitive wheat market, their growing incomes in recent years have ramped up demand for higher quality food products – leading to an increase in demand for HRS, North Dakota’s primary class. Going back 10 or 20 years, sales of HRS would be a few million bushels here and there each year, now looking at the last four years, sales of HRS to China have ranged from 10 to 40 million bushels. They aren’t always a consistent buyer in terms of quantity, but the trend is definitely up for HRS sales.
The HRS class is in high demand in China to use for blending with domestic wheat to improve quality for end-use products. Despite being the largest producer of wheat in the world, and accounting for more than one-half of world wheat carryover stocks, China is deficient in higher protein, higher quality wheat. “Our customers are willing to pay a premium for HRS because it meets their high quality expectations and our export market focus is on quality conscious buyers,” says Bruce Freitag, NDWC Chairman. “Our state’s wheat producers invest in market development through our membership in U.S. Wheat Associates. These markets weren’t built overnight and relationships, quality, and stable supplies are what maintain these markets,” adds Freitag.
While sales of U.S. HRS to China have stalled, wheat from Canada has filled in that gap. Sales out of Canada have reached 36 million bushels, more than double the pace of the previous year. North Dakota wheat producers are hoping to gain those sales back. The NDWC, along with U.S. Wheat Associates have pressed the Administration to come to a resolution with China.
Recent discussions between the two countries point to some potential in achieving sales of U.S. wheat to China in the coming months. With a 1.5 million bushel sale on the books, most of it being spring wheat, there could be light at the end of the tunnel but those sales will need to become shipments. “China was a growing demand base for HRS wheat, and the sooner we can get back to competing on an equal basis with Canada and other suppliers, the better support we should see in prices. It’s hard to lose markets when they’ve taken decades to build.” Freitag concludes