China seeks better trade relations; Wheat condition improves; Palm oil near YTD high

Recent meetings may show diplomatic efforts to improve relationships with key agricultural suppliers

Recent diplomatic meetings may be a sign that China is looking to improve its relationships with major trading partners such as Australia and the United States as tensions have continued to be high. 

Tensions between the two countries and China have been rising and have led to trade disruptions in recent years. The pandemic and China’s extended zero Covid policy also made meetings difficult and prevented in-person dialogues.

Australia and China’s top trade officials recently held a virtual meeting which was the first since 2019 and announced plans for Australia’s trade minister to visit Beijing sometime in the near future. 

There was hope that the coal trade resumed as two vessels with Australian coal were headed to China for the first time since 2020, although one vessel may have already been diverted to Vietnam.

It was also reported on Friday that China’s Minister of Agriculture, Tang Renjian, meet with US Ambassador Nicholas Burns and discussed ways to improve agricultural cooperation. 

Wheat conditions in Shandong improve YoY

The condition of new crop winter wheat in Shandong province in north China improved year on year, according to reports from local state media.

The good-to-excellent rating of wheat crops in China’s second-largest producing region hit more than 85% as of last week.

The local government in Shandong urged farmers and cooperatives to prepare for adversary weather conditions early to avoid crop damage.

In 2021, Shandong province had a total wheat output of 26.4 million tons, accounting for roughly 20% of China’s wheat production that year.

It was the second-highest volume after Henan province which produced 38 million tons in 2021.

Palm oil, hog futures near YTD high

The futures market for agricultural products in China largely traded in a tight range and closed slightly higher in the final trading session ahead of the weekend.

The oilseed sector in China mostly closed flat apart from peanut futures on Zhengzhou Commodity Exchange (ZCE) which closed more than 1% up due to rising cash prices.

Feed ingredient futures also consolidated sideways.

However, futures for edible oil jumped with palm oil futures on Dalian Commodity Exchange (DCE) leading the rally as the expectation of demand recovery improved amid warming temperatures in China. Chinese consumers are estimated to go out more frequently and dine at restaurants.

Meanwhile, the palm oil inventory level has been trending lower, which tightens the overall supply.

In the protein sector, live hog futures on DCE jumped on Friday with major breeders holding back sales against the expectation of state-backed purchases that would lift domestic pork and hog prices in the near-term.

Futures close