Wheat Climbs After China Makes Biggest Weekly Purchase in Almost Six Years

Wheat futures extended the biggest gain in a week in China unexpected demand for U.S. exports, the largest exporter in the world.
China, the largest consumer, bought 116,000 metric tons of U.S. in the week ended March 17, more than a week since July 2005, Agriculture Department data showed. Zhengzhou wheat rose to a record last month on speculation that the drought in areas of the country would reduce supplies. Rainfall and irrigation have partly alleviated concerns since.
"Imports will rise by more than 30 percent this year to top 2 million tonnes, because we suspect that the local harvest may be 11 million tonnes below the government estimate," said Li Qiang, director general of Shanghai JC Intelligence Co., in a telephone interview today.
The production will be little changed at 115.1 million tonnes in the year ending in June, the China National Grain and Oils Information Center predicted this month.
"From a regional perspective, if China is having a problem with the belt of central and northern growth is likely to be presented for the first time in the corn" crops because of the growing season is earlier than corn said Mike Zuzolo, president of Global Commodity Analysis & Consulting in Lafayette, Indiana. China can also be purchased to cool food inflation, he said.
Wheat futures for May delivery rose 0.6 percent to $ 7.4425 a bushel at 10:33 am today in Beijing yesterday after rising 3.5 percent to $ 7,395 at the Chicago Board of Trade, the biggest gain for a most-active contract since March 17.
Price Surge
The price has risen nearly 56 percent last year as the drought stimulated Russia to ban exports of grains, while floods eroded crops in Canada and Australia. Food costs worldwide reached a record last month, United Nations, he said.
China food costs rose 11 percent in February from a year earlier. The country should be self-sufficient in wheat this year after becoming a net importer in 2010 for the first time in five years, according to USDA.
The amount was a "surprise," said Larry Glenn, an analyst at the agricultural frontier in Quinter, Kansas. China in 2010 was a net importer of corn for the first time in 14 years, USDA data show.
"Based on my experience, if you're really looking to China to buy corn, which hopes to buy wheat in the first place," said Zuzolo. "Their policy is to try to keep more corn at home, not for export but not import either. Their policy is likely to bring more wheat than it is corn."
High Quality
purchase of China announced yesterday includes 90,000 tons of variety hard red spring, 20,000 tons of white wheat and 6,000 tons of wheat, red winter, the USDA said. spring wheat, grown in north central and northwestern U.S., is used to make bread. white wheat is for bread and noodles, while the soft variety, red winter is for cookies and cakes.
"China's demand for animal food is robust, so that China could import U.S. wheat quality for flour and use their own varieties of low quality food," said Li Shanghai JC. "China is also importing feed wheat from Australia at this time."
Futures also gained on speculation the U.S. Great Plains is not enough rainfall to alleviate drought, "said Glenn.
Texas has the worst drought in 44 years, according to state climatologist, and drying extends to Oklahoma, Colorado and Kansas. Some areas may get 0.5 inches (1.3 centimeters) of rain in the next week, while in Group Commodities said.
"We have some moisture in the head of the plains states, but I think it will be enough," said Glenn.
The U.S. wheat crop was the fourth largest in 2010 at $ 13 billion, behind corn, soybeans and hay, government data.

(Source: http://www.bloomberg.com/news/2011-03-25/wheat-climbs-on-surprise-purchases-from-china-concern-over-dry-weather.html)