China, the world's largest grower of wheat, is making its largest purchase of the grain from the United States in nearly two decades after severe flooding earlier this year cut into its reserves.
China has purchased 3.7 million metric tons of wheat from the U.S. so far this season, or nearly 4.6 times more wheat than last year's purchase of 805,400 metric tons.
In addition to the flooding this spring -- the worst in some areas since 1954 -- increased demand for high-quality wheat have dented grain stocks in China.
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A year earlier, China "controlled about 30 percent of the world's wheat stocks," Steve Mercer, spokesman for U.S. Wheat Associates, told Newsmax. The value so far of this year's wheat sales to China is conservatively over $1 billion, or nearly 10 percent of total U.S. wheat exports, Mercer said.
Factors influencing the growing Chinese desire for U.S. wheat include affordable prices, the consumer preferences of a rising middle class, and a growing urban population resulting from a demographic shift from the countryside, which has also led to a demand for higher-quality food products, including more protein and animal feed.
Sinograin, the name given to the state-owned China Grain Reserves Corporation created by China's State Council in 2000, is currently in the process of shoring up the nation's grain reserves.
Food security has long been a core national security concern for the Chinese government, hence the creation of Sinograin. Mercer said the food is a "huge … security issue for them."
A Chinese team of six milling executives and purchasing managers on August 13 completed a tour of grain facilities in Oregon, Idaho, Montana, and North Dakota for direct talks with wheat researchers, farmers, and storage facility operators, gaining first-hand experience with U.S. wheat regional production and storage.
"We found the opportunity to … convey our long-term requirements to the industry," the Chinese millers said in a joint statement to Newsmax. "It is important as we will buy more [Dark Spring, Dark Northern Spring and Soft White wheat] since they are suitable to blending with our domestic wheat to make premium value foodstuffs."
The expansion in China of companies like McDonalds, Starbucks, and Yum Brands (a group that includes Taco Bell, KFC, Pizza Hut, and WingStreet restaurants) also are pacing the demand for higher-quality wheat, Mercer said.
Crops for Soft Red Wheat -- used primarily for baking cakes, pastries, flat breads, and crackers-- have been good for the last two years, Mercer said, and that is primarily what the Chinese have purchased.
Agricultural exports are one of the few bright spots for U.S. trade, as the deficit with China has grown from $6 million in 1985 to more than $315 billion in 2012, according to the U.S. Census Bureau. The nation's overall trade imbalance for 2012 was $729 billion.
"Agricultural exports continue to be a strong and growing component of U.S. exports," an Agriculture Department spokesman told Newsmax. In fiscal 2012, agricultural exports reached $135.8 billion, supporting 1 million jobs for U.S. farmers and ranchers.
"More than $23 billion worth of those agricultural products went to China alone," he said.
While wheat sales for the year are not complete, this would be their highest level to China since the 1991-92 season, the agriculture department spokesman said, adding "current USDA projections forecast that China will import 8.5 million tons of wheat from all sources in the 2013-14 crop year" – with some 43 percent coming from the United States.
"The United States is the world's chief food exporter," John R. Block, who served for six years as secretary of agriculture for President Reagan, told Newsmax.
Block, now a senior policy advisor with OFW Law in Washington, said it could be argued that the United States is still the breadbasket of the world.
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