Dive Brief:

• China has accelerated purchases of U.S. wheat as the world's top importer looks to offset domestic losses from heavy rains.
• Total commitments of U.S. wheat to China have surpassed 2 million tons since June, driven largely by strong demand for soft red winter wheat. Recent purchases made on Dec. 4 and Dec. 6 marked the largest singular commitments for U.S. wheat since 2020.
• China is diversifying its imports after top trading partner Australia suffered crop losses from a devastating drought. In addition to wheat, China has made a number of significant soybean purchases from the U.S. within the last week.

Dive Insight:

China's commodity buying spree could provide a needed boost to U.S. wheat exporters, who have seen their market shrink over the last decade due to uncompetitive prices, a trade war and stiff competition from Australia, Canada and Europe.

Wheat imports from Australia are down 27% so far this trade year, compared to last year when the country made up 60% of purchases. The steep decline is opening the door to trading partners that have traditionally provided only small volumes.

After near-zero exports from Kazakhstan last year, for example, China has resumed large purchases from the country in the 2023/2024 marketing year, which began in July. Additionally, China lifted restrictions on Russian wheat last year, and imports have soared to nearly a record in just four months.

Sales to China have also improved market prospects for the wheat industry in the U.S., where exporters were expecting sales to hit a 52-year low. Soft red winter wheat sales to China have more than quadrupled from the same period last year.

The increased demand has benefited prices, with U.S. quotes for soft red winter wheat rising $17 since November to $273 a ton. Prices for hard winter wheat climbed to $294 a ton, a $5 increase that also reflects increased sales to China.

China's frenzied pace of imports puts it on the path to exceed a tariff rate quota of 9.36 million tons by a significant margin. Once the quota threshold is passed, importers will need to pay even more in tariffs for the commodities needed to fulfill demand.

Although China surpassed the threshold in 2021 and 2022, this is the first calendar year the country is expected to import over 10 million tons since 1995.