beyondbrics

China, the world’s largest wheat producer, has been sitting on the sidelines of the global wheat panic.  Today one of China’s most powerful government ministries spoke out on the issue, seeking to allay fears that China would start buying wheat on international markets.

“International grain market prices are all significantly lower than China’s domestic market, so the wheat price spike in international markets will not have an obvious impact on the domestic market,” the National Development and Reform Commission said in a Q&A on its web site.

China is self-sufficient in wheat-growing 115m tonnes of the grain last season-and Beijing considers food self-sufficiency a matter of national security. The country also holds more than one-third of the world’s wheat reserves, with some 63m tonnes of stock according the US department of agriculture.

“China’s wheat price, depending where you price it, is a little over US$9 a bushel, so a significant premium to the international markets,” said Brady Sidwell, China analyst at Rabobank “These high prices are necessary to maintain China’s grain self sufficiency.”

Yesterday, the USDA more than doubled its forecasts for Chinese wheat exports to 2m tonnes – an indication that the Chinese are expected to take advantage of high international prices.

The recent wheat panic, driven by an export ban in Russia after a poor harvest there, has left the Chinese market relatively unchanged. China does import some wheat-mostly high-protein varieties that may not be available domestically-but ultimately produces more than the country consumes. This year’s harvest in China has been slightly lower than last year’s, falling some 500,000 tonnes according to the USDA, but is still more than enough to meet demand.

China’s self-sufficiency policies are often costly for consumers as they drive up the cost of grain. But today, as world wheat markets shudder after an export ban from Russia and similar talk from Ukraine, China’s leaders are no doubt breathing sigh of relief.