Wheat : China. Episode 3

China – Flood, Rains and Russia

In the third episode our series on wheat we look at China. In the first episode we looked at national security and in second we looked the droughts in Kansas. Now we are looking at the floods in China – the world’s biggest producer of wheat. In the next episode we will look at Ukraine.

China is the largest producer of wheat in the world, producing more than Russia and Ukraine combined.  China has such a high demand for wheat they also import around 10 million tonnes a year.  This demand is driven by animal feed.   If China has a poor harvest they import more, pushing up global prices even further.

In July 2021 China suffered a major flood, in a region which produces over 20% of their wheat. The flooding was caused by several months of rain falling in just one hour. Resulting in widespread damage and destruction.

These satellite images, obtained using infrared, show some of the flooding.

In September 2021 China suffered continuous rains which delayed the planting of wheat, which can reduce the yield. On March 5th, 2022, China reported that yield would drop by 20% – over 26 million tonnes. Generic satellite analysis of some regions in China shows a reduced level of vegetation, aligning with the Chinese reporting.

However, further study shows something different

Our detailed analysis on a sample of wheat fields in these regions shows healthier crops in 2022 compared to 2021.

Even if areas are under performing, it’s too early to tell.  In previous years we have monitored crops at a national level and seen that a good summer can overcome a bad winter. For example: In 2021 we saw crops flagged as “poor” compared to the same time in 2020 and 2019. However, those 2021 crops later outperformed, and provided a higher yield,  than both previous years.

In addition to the lack of clarity from the data, there is the complication of war in Ukraine.

As sanctions were applied to Russia, China allowed wheat to flow from Russia.  As sanctions increased on Russia, Chinese purchasing requirements increased – due to the report on poor wheat yields.

In 2008, after the financial crisis,  and 2014, after the invasion of Crimea,  China increased its financial support for Russia. Is it doing the same again now? Or does China really risk losing 20% of its harvest?  It has been terrible growing conditions over the winter, but it might not be as bad as it seems

For this reason, we will be monitoring all of China’s wheat – millions of acres, on a weekly basis. This analysis  combined with weather data will allow us to understand and predict the supply of wheat.