China Cancels Historic High Wheat Imports

A truck driving through a field of wheat

Image Credits: Richard Stock through Unsplash

In recent years, China has become both a key player and a hindrance in the world of commodities. And amongst them, none have been the subject of tension as wheat in the past few days.

Just in the month of March, the country canceled some 264,000 metric tonnes of wheat imports from US producers—the largest such cancellation since 1999. This followed a similar cancellation earlier in the month for an additional 240,000 metric tons of wheat. Not to mention that, in the same period, Chinese businesses canceled an additional million tonnes of wheat imports from Australia

Put together, these three cancellations would equal little above 1.5 million tons of wheat. For context, in all of 2023, China imported approximately 162 million metric tons of wheat from other countries for internal consumption. That is, in a span of a couple of weeks, the country has canceled close to 1% of its annual wheat consumption. 

Chinese Wheat Cancellations over Time

A bar graph showing the size of cancellations by Chinese companies of wheat imports over the last 25 years.
(Data from Bloomberg)

The cancellations have come as a surprise given historical trends in Chinese consumption. In recent years, Chinese wheat imports have grown considerably jumping from a value of just $1.17 bn in 2012 to $4.52 bn in 2022—almost a 4x increase in the span of a decade. All this signifies that China has become increasingly reliant on outside producers to meet internal consumption.

In a way, we can think of wheat as a proxy for the entire Chinese economy. Over the last half a century, the country has undergone a serious transformation. Before the reforms of Deng Xiaoping in the late 1970s, the country was mostly agrarian in nature, focusing on meeting internal consumption. After Deng’s transformation, China began a slow march towards industrialization.

Chinese Wheat Imports over Time

A line graph showing the value of Chinese wheat imports over time.
(Data from OEC)

The latter means that, in the course of half a century, China has gone from selling commodities to the outside world to importing them from other developing nations. Nowhere is this clearer than in terms of oil, gas, and other fuels needed to power massive factories. In 1995, fuel imports accounted for just 3.85% of the nation’s total imports. By 2022, that share had grown to 19.7%—not to mention that total imports grew from just $126 bn to $2.16 T.

So, the question naturally emerges. If China has become increasingly reliant on outside commodities, why would it cancel such a large share of its wheat consumption?

There are two theories to explain this phenomenon. The first is that China, over the years, could’ve become more reliant on its own wheat production instead of importing it from abroad. However, most evidence suggest a contrary pattern. Although China has certainly increased wheat production in the last ten yeats, as the below graph suggests, production has recently stagnated. In fact, in the last five years, wheat production has merely increased by 5 million tons—enough to justify the recent cuts, but not as much as to explain such an aggressive strategy.

The second is that China is preparing for a world where it can rely less and less on the US given political friction between both nations. This isn’t too radical a belief when one discovers Russia—also at odds with the US—is one of the largest wheat exporters in the world (the fifth largest to be precise). Although such an argument is hard to prove, it does provide an initial explanation to China’s current conduct.

Chinese Wheat Production (2013-2023)

A line graph of Chinese wheat production between 2013 and 2023
(Data from Statista)

Regardless of the reason, the fact remains that China is playing an adverse role for the commodities market. It is unclear if the current cancellations are stand alone events or if they will become common disruptions to the wheat supply chain.