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China buys tons of U.S. wheat

04/09/2013 @ 6:20am

China National Grain Reserves Corp. bought more than 700,000 metric tons of soft, red winter wheat from the U.S. in the past weeks taking advantage of recent lower prices, trading executives said.

The company also known as Sinograin bought the wheat for reserves, a trader with a state-owned grain trading house said on Tuesday.

Domestic wheat prices have increased about 15% so far this year. Part of the reason is that government stocking last year tightened supply.

"Sinograin is now more flexible than before; when there is profit they will import," the trader said.

Near-month wheat futures for May delivery on the Chicago Board of Trade is now trading around $7.11/bushel--down 25% from a multiyear high of $9.4725/bushel reached on July 23 last year.

The deal was confirmed by an official with Sinograin's branch in eastern China.

The official, who declined to be named, said "the headquarters of Sinograin booked the cargoes," but he didn't elaborate on price or volume.

May shipment U.S. soft, red winter wheat is quoted at about CNY2,450/ton in southern China ports, about CNY200, or 8% lower than domestic price, traders said.

In the world-wide market prices of SRW wheat for shipment between June and December from the Gulf of Mexico range between $275 and $290 a ton, free on board. Freight from U.S. Gulf to Shanghai is around $40-$44/ton.

In 2012 China's imports of wheat rose 195% to 3.7 million tons. In the January-February period China imported 401,875 tons of wheat--down 31% on year, according to customs data.

Traders said further purchases may slow owing to bird flu because SRW is a direct substitute for corn and can be used both for human and animal feed.

A Chinese buyer purchased 14-16 cargoes of soft, red winter wheat from the U.S. for delivery between June and December, according to a report by the sate-backed China National Grain and Oils Information Center. It is the first time this year China has bought such a large amount of U.S. soft, red winter wheat. The CNGOIC report didn't specify buyer, volume or prices.

Demand from mills has drained state reserves of wheat. In the year to April 3 the government has sold 13.4 million tons compared with 2.7 million tons in the same period last year, according to the CNGOIC data.

Sales of state reserves have become the main way for mills to get supplies, analysts said.

-Sameer C. Mohindru contributed to this article

Write to Zhoudong Shangguan at zhoudong.shangguan@dowjones.com

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(END) Dow Jones Newswires

April 09, 2013 02:32 ET (06:32 GMT)

DJ China Buys More Than 700,000 Tons US Wheat for Reserves -Traders->copyright

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