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Thursday, 3 March 2011

A warning on wheat comes from China

Global food prices hardly need an other reason to rise. But takl that China may have to boost wheat imports again this year because of poor harvests has fueled volatility. As with other commodity markets, grains may have to get used to a hungry dragon.

Perspective is needed. China’s wheat imports hit 1.4 million tons in the year to June 2010, says the International Grain Council, up 260%. Corn imports may quadruple this year, it says. But for both Commodities, China represents only 1% to 2% of world imports.

Also, China’s wheat imports are volatile; as recently as 2004-2005, they were 6.8 million tons a year. Changing diets could reduce pressures. Wheat consumption per capita has fallen in this decade. Mean-while, Robert Ash, an economic professor at London’s school of Oriental and African Studies says it isn’t outlandish for China to produced 546 million tons last year.

Water scarcity and land shortages are concerns. But tensions could hit corn markets firs, given its use as animal feed. New imports might well come from the U.S.

Is this a chance for closer Sino-U.S. ties and an opportunity to shrink Amerika’s trade deficit? May be, but demand on U.S. corn already are high, with the increasing use of biofuels. Instead, rising Chinese demand could turn into another source of tension.

Source: The wall Street Journal Vol XXXV no. 124 February 25-27, 2011. P. 28. By AndrewPeale.

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