China Buys Australian and Canadian Wheat as U.S. Waits Turn

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China has purchased Australian, Canadian and French wheat as Beijing looks to fill import quotas set by the World Trade Organization, according to people familiar with the matter.

In the past two months, China bought about 1 million metric tons of wheat from the three countries, said the people, who asked not to be identified because the transactions are private. The purchases are part of the 9.6 million-ton annual wheat quota China allocates to buyers, the people said.

China’s purchases come as traders are watching to see when the world’s top commodities importer will step up buying of U.S. farm goods. Beijing agreed earlier this month to boost purchases of American agricultural supplies by $32 billion over two years from pre-trade war levels.

The move may signal China will make good on its promise to administer its tariff-rate quotas for wheat, rice and corn after losing a WTO battle last year that was brought by the U.S. That pledge was also part of the phase-one deal, which stipulates the Asian nation needs to re-allocate any unused quotas by Oct. 1.

China needs to import high-quality wheat to plug a domestic shortage of the grain used to make bread, cakes and cookies. Most of the cargoes purchased were for shipment in the first half of the year, the people said.

While some American traders were disappointed, Beijing may be waiting to get a better idea of what the U.S. wheat harvest will look like. China has stressed that imports from America will be based on market prices and costs usually fall when farmers start gathering the crop around June-July.

China has never fully filled its tariff-rate quotas, using non-tariff barriers to protect domestic farmers, a move that led to the U.S. complaint to the WTO. The pressure is now on for China to meet its obligations.

Wheat futures traded in Chicago rallied about 4% this year through Jan. 21, before news of an outbreak of a novel coronavirus in China sapped demand for risk assets including agricultural commodities. Futures for March delivery slipped 0.1% on Tuesday.

©2020 Bloomberg L.P.