Reading Between The Lines

Australian export figures reveal that more than 400,000 MT of wheat has been shipped to China since the start of their marketing year in November. That's the highest level of sales in at least the past five years.

Yet officially China has huge wheat stocks of it's own, this wheat is simply being used to blend into what they already have, traders say.

Certainly whatever they have got in store has probably been there for some considerable time, several years probably.

Recent revelations from the USDA's attache in China that last season's crop was probably overstated to the tune of 8.5 MMT appear to have been largely ignored. They certainly were by the USDA themselves in the March 10 WASDE report, which left Chinese production last year unchanged at 114.5 MMT.

And if they're prepared to ignore 2009's overestimate then there's really no point rocking the boat and looking even further back than that is there?

India meanwhile, the world's second largest producer and consumer of wheat after China also continue to send out confusing signals.

Talk of large scale exports to make room for this season's impending new crop have largely failed to materialise.

They too are supposed to have huge government reserves, yet despite spiraling food price inflation the authorities have been extremely reticent to release these stocks onto the market at anything like a sensible price.

Today Indian ministers have agreed to extend a tax-free import window for wheat beyond the end of the month when it was due to expire.

Whilst they've also agreed to permit the export of 650,000 MT of "wheat products" at the kind of prices they've been asking of late they will be comfortable in the knowledge that they won't find many takers.

To sum it up, we have absolutely no idea really what stocks are being held by the two largest consumers of wheat in the world. Nor can we be sure what condition those stocks are in.

You probably don't need to be Poirot to figure out that they probably haven't got anything like the combined 77 MMT ending stocks that the USDA are predicting, that's 39% of all the wheat in the world incidentally. Neither do you require the services of David Suchet to guess that much of what they have got isn't fit for feeding to the cat.