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China's COFCO buys 150 kt of Australian feed wheat

Published on 19 January, 2011, Last updated at 19:57 GMT

China's state-owned grains trader COFCO Co Ltd [CNCOF.UL] has bought three cargoes of Australian feed wheat for March and April shipment, a Chinese feedmill source and a trade source with knowledge of the shipments said on Thursday.

The cargoes, totalling about 150,000 tonnes, were priced at $260 per tonne FOB, they said.

Traders at COFCO's wheat department declined to comment.

On Wednesday, talk of a much larger feed wheat deal, 500,000 tonnes, sent Chicago Board of Trade corn futures <0#C:> down 2.8 percent as traders feared the wheat could replace corn, which China has begun importing in large quantities. [ID:nN19242727]

The feed mill source said COFCO planned to sell the feed wheat to mills in the south of China. Feed mills have not received any wheat import quotas and it was unclear if COFCO was using private or government quotas for the purchase.

China has had an annual wheat import quota of 9.64 million tonnes since the country joined the World Trade Organisation in 2001. Only 10 percent of the quota goes to private flour mills, which largely import milling wheat.

In 2010, China imported 1.23 million tonnes of wheat, 36 percent more than in 2009, which saw a big shift from net exports the previous year. China normally imports to meet demand for high quality bread and cakes at the top end of the market, but it is under no pressure to import because it holds large reserves.

Australia, the world's fourth-largest wheat exporter, is expected to have ample supplies of feed-grade wheat after torrential rains and floodings in recent weeks downgraded the quality of much of its latest wheat harvest.

"More imports much depend on prices. If prices are competitive and domestic clients can accept the price, we believe more imports could happen," said one trading executive with COFCO.

China's major wheat producing areas are undergoing a serious drought, and a foreign trading house estimated last week that the drought may reduce wheat output by 1.5 million tonnes if it lasts until March.

"Relentless droughts that started to dry out winter wheat producing areas such as Shandong and Henan provinces in November continue, affecting some 4 million hectares of cropland," the official Xinhua News Agency cited Chen Lei, deputy head of drought relief efforts, as saying this week.

The feed wheat, with freight and import duty, was about 1,900 yuan per tonne, which was more attractive than corn <0#ASCORN-CN> offered at 2,200 yuan per tonne in some provinces in the south, according to calculations by some feed mill officials.


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