In the agriculture world, news of the partial U.S.-China trade deal has sparked a lot of buzz about soybeans. It turns out, wheat could actually end up being a bigger surprise winner.
Speculation is mounting that China will work to fill its wheat- buying quota as part of the detente, a pledge it failed to stick to in the past. While the allotment, set by the World Trade Organization, could be filled by supplies from any country, it still means additional global demand at a time the market is tighter.
“The potential that China could secure an additional 5 to 6 million tons of world wheat annually is underpinning Chicago Board of Trade wheat,” Chicago- based consultant AgResource Co. said in a report.
If Chinese purchases were to reach the quota mark of 9.6-million metric tons, that would represent a big jump in demand. In the six years through 2017, buying has averaged less than 50% of the allotment.
China will likely fill its quota with the cheapest wheat in the market. While that’s usually grain from the Black Sea, U.S. supplies have been getting more competitive and international buyers have recently turned to American shipments. Relatively tighter corn supplies in South America and wheat in top shipper Russia have made American grain more competitively priced.
While some traders remained skeptical China would import much U.S. wheat, Shanghai JC Intelligence Co., the Asian nation’s most clued-in agricultural consultant and researcher, recently estimated purchases of Americans supplies could reach 5 million tons as part of an effort to buy $40 billion in agricultural products from the U.S. under the partial trade deal.