Stock-building: China resorts to huge agri imports

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November 26, 2020 5:45 AM

Beating the Covid-19 blues, China has been importing farm products at a brisk pace this year in an apparent bid to take advantage of relatively stable global prices and replenish its depleting food inventory.

Beijing’s buying spree has prevented global farm commodity prices from a free fall in the aftermath of the pandemic.

Beating the Covid-19 blues, China has been importing farm products at a brisk pace this year in an apparent bid to take advantage of relatively stable global prices and replenish its depleting food inventory.

While China’s purchases are expected to continue unabated in the coming months, this massive import drive hasn’t quite benefited India.

Between March and October, China’s imports of wheat shot up by almost 232% year on year to six million tonne, while those of pork jumped by 135% to three million tonne. Corn imports climbed by 102% to 6.9 million tonne, sugar by 23% to 3.3 million tonne and soyabean 18% to 69.7 million tonne, according to Bloomberg data.

China had imposed several curbs on trade in January and February this year in the wake of the Covid-19 outbreak there.

Though locusts and erratic weather have hit China’s production of some crops, the output levels haven’t faltered much. In fact, while the output of wheat, rice, and corn has held steady, that of oilseeds has dropped marginally.

But this voracious appetite for agricultural products hasn’t quite contributed to India’s exports. According to the DGCIS data, China barely imported some of the major farm commodities such as wheat, corn and soyabean, from India, thanks to its reluctance to give India greater market access. Its imports of sugar from India stood at a paltry $46 million between January and September, while those of oilseed were to the tune of $41 million. However, its purchases of coffee, tea and spices from India rose by 11% during the January-September period to $436 million.

Beijing’s buying spree has prevented global farm commodity prices from a free fall in the aftermath of the pandemic. If anything, it buoyed the prices; nevertheless, they still remain at relatively reasonable levels.

Not surprisingly, the Bloomberg Agriculture Sub-index, which dropped by 7% in two months through February, has since risen by just over 15%. The index is composed of futures contracts on coffee, corn, cotton, soybeans, soybean oil, soybean meal, sugar and wheat. Under normal circumstances, though, purchases of this magnitude would cause a more dramatic spike in global prices.

In value term, Beijing’s overall farm imports rose 16% on year to $113.7 billion during the March-October period.

According to a report in S&P Global Platts, China’s massive purchase of grains in recent months has pushed up its import estimates for corn, wheat, soybeans, sorghum and barley. Beijing’s increasing reliance on imports comes in the midst of growing concerns around shortage of supply, rising domestic prices and fear of pandemic-induced logistical challenges, it said, quoting analysts.

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