Global wheat import demand dented by local output, economic woes

Reuters

07-02-2025

SINGAPORE/CAIRO, Feb 7 (Reuters) - Global wheat imports are likely to drop this year as slowing economic growth among top buyers, a stronger greenback and higher local cereal output curb grain buying, putting pressure on prices despite world inventories headed for nine-year lows.
Slower purchasing by top importers could put a cap on grain prices by offsetting concerns that unfavourable weather in the Black Sea region, the world's biggest exporting area, India and the United States will curtail output. Lower Chinese intake, meanwhile, will hurt Australian farmers who have just finished harvesting a near-record crop and had come to rely on China's demand in recent years.
Top importer China is expected to buy less than half of last year's volume in the first six months of 2025, while demand growth is likely to slow in Indonesia, the world's second-biggest wheat buyer, and Egypt, the No.3 purchaser, millers, traders and analysts said.
Higher Chinese wheat output and a rebound in Indonesia's rice production will limit shipments there, while a bigger crop in Iraq will keep one of the Middle East's largest buyers from splurging on imports, traders and analysts said.
"One structural market factor that may be softening demand longer term is increasing production in key import markets, like China," said Dennis Voznesenski, an analyst at Commonwealth Bank in Sydney.
China's wheat output is forecast to rise in the year to June 2025 by 2.6% from the previous period, according to estimates from the U.S. Department of Agriculture on January 22.
The USDA also said imports in the period may drop by 37% from a year earlier to 8 million metric tons, citing data from the China National Grains and Oils Information Center.
"The volatile geopolitical environment we are currently experiencing, including real wars and trade wars, is prompting importing countries to ramp up domestic production to reduce their reliance on global supply chains," Voznesenski said.
The declining imports are set to occur amid a tightening of global stockpiles, with the USDA expecting inventories to drop to their lowest in nine years by the end of June.
Wheat consumption may also slump in major buyers because of lower growth, with China's economy expected to slow in 2025, while Indonesia's growth is stagnating and Egypt's GDP in 2023/24 expanded less than a year earlier.
Foreign wheat import costs have risen or held steady despite international prices hitting a four-year low in 2024 as many emerging market currencies have declined against the dollar.
China's yuan has been weakened by the U.S.-China trade dispute and Indonesia's rupiah and Egypt's pound are near all-time lows versus the greenback.
CHINESE DELAYS
China recently delayed imports of up to 600,000 metric tons, with traders expecting declining purchases in coming months.
Darin Friedrichs, co-founder of Shanghai-based Sitonia Consulting, is bearish on Chinese wheat demand for the next six months, adding: "The 2024 (Chinese) crop had nearly perfect weather, production broke records, and the quality was very good. There isn't much need for imports."
Chinese importers have booked around 1 million tons for March arrival, which is "down on recent years where sales were double or triple for the same time," said Rod Baker, an analyst at Australian Crop Forecasters.
Rival Asian importers are also cutting purchases.
Indonesian rice output is set to rebound this year after El Nino weather effects depleted the crop last year, with the government projecting production will increase to 32.8 million tons, from 30.62 million tons in 2024.
That is helping food processors to switch back to locally produced rice flour from imported wheat.
The struggling rupiah is also crimping wheat purchases, said a senior executive at the Indonesian Wheat Flour Producers Association, who asked to remain unidentified since they are not authorized to speak to media.
"The buying power has dropped due to the strong dollar," he said.
Egyptian wheat purchases will likely fall this year. State-grain buyer Mostakbal Misr purchased 1.267 million tons at the end of December, enough to last the country until June it said then. However, it procured another roughly 250,000 tons in January.
Egypt's previous state buyer, the General Authority for Supply Commodities, typically purchased 4 million to 5 million tons per year.
In 2024, Egypt imported about 14.7 million tons of wheat through state and private-sector buyers, according to trade data reviewed by Reuters.
"The big importer Egypt is suffering from serious economic problems with growth low and the country needing finance from Arab donors to help it with wheat purchases," said a German grains trader.
Major Middle Eastern buyer Iraq said in October it would halt wheat imports for its subsidy programme because of 1.5-million-ton crop surplus from a bumper harvest.
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