Miscellaneous
Rumours emerged on Thursday of last week that China had purchased French wheat and by Friday the wires seemed to confirm that the French had sold between 6 and 12 panamax cargoes for first half 2020 delivery.This fresh round of purchases is purported to be under China’s 2020 tariff rate quota system. However, some traders cautioned that this number may include cargoes already sold last year under China’s 2019 tariff rate quota, which has been extended to the end of February 2020.A tariff rate quota is a two-tiered import tariff system endorsed by the World Trade Organisation (WTO). The first tier has a lower tariff rate that applies up to a specified quantity of in-quota imports. The second tier has a higher tariff rate that applies to imports that are in excess of the quota quantity.Tariff rate quotas are designed to allow at least some market access for commodities where the second-tier tariff provides high protection. Some forty countries world-wide have a total of 1,128 WTO tariff rate quotas on agricultural commodities.In acceding to the WTO in 2001, China agreed to allow global access for imports of specific quantities of corn, rice, and wheat at a low 1% in-quota tariff. Maximum annual first-tier tariff rate quota imports by China from all sources are 9.64 million metric tonnes of wheat, 7.2 million metric tonnes of corn and 5.32 million metric tonnes of rice.The latest French sales come after more than 640,000 metric tonne of French wheat has been already shipped to China since the start of the 2019/20 marketing season in July last year. Total European Union shipments to China in the first half of the marketing year total 950,000 metric tonne. This compares to a total of just 130,000 metric tonne in the full 2018/19 marketing year.French wheat is currently the cheapest in the world and China's tariff rate quota commitments are dependent neither on origin nor on the Phase 1 deal with America. The competitiveness of French wheat was reflected in the results of the latest Egyptian tender, won solely by French exporters.Surprisingly, French transport strikes, that have been running for more than two months, haven’t slowed the pace of wheat shipments. France exported 1.2 million metric tonne of soft wheat to countries outside of the European Union in December, the highest monthly volume since the start of the 2019/20 season.However, in a potential blow to French export demand, Algeria has given preliminary approval for the importation of Russian wheat. Algeria has traditionally been a very loyal French customer. Russia is also sending wheat samples to Iraq in an attempt to gain access to some of the higher quality middle eastern demand.That said, Russia is struggling to meet current demand, and it seems that the remaining exportable surplus is far less than previously suggested. The latest 2019/20 wheat export estimate from IKAR, Russia’s leading agricultural consultancy, is less than 32 million metric tonne, compared to 33.5 million metric tonne in January.Russian agricultural infrastructure operator Rusagrotrans forecasts total wheat exports lower at just 30 million metric tonne. With 22 million metric tonne already shipped in the current marketing year, that implies just 8 million metric tonne remains available for the rest of the season. A meagre number, especially when countries such as Algeria, Morocco, Tunisia and Egypt still have old crop requirements to cover.Australian exporters also scored an invitation to the recent wheat soiree, with substantial Chinese purchases in late December and again in January. Three cargoes were booked in December, all of which have now arrived in China, and as much as 350,000 metric tonne was booked last month for first half 2020 shipment.China has now purchased more than 1 million metric tonne of Australian, Canadian and French wheat in the past two months as Beijing looks to fill the import q