What if China Bans Australian Wheat?

The Chinese government imposed import tariffs on malting barley from Australia in May. The reason for this is, among other things, that China itself still has large stocks of the old harvest. It is striking that the Chinese government has now refused a shipment of barley from Australia for the second time in a relatively short time. A few weeks ago it was a shipment from CBH Group and now from Emerald Grain. As a result of the refusals, there are now rumors that China wants to impose an import ban on various products from Australia, including wheat.

How big is the problem?
With around 6%, China does not have a very large share of Australian wheat exports, so the country seems to be able to get away with a ban. There are still plenty of alternative countries to export to. So did earlier Rumors have already circulated that the Australian harvest would fill the shortages in the European Union. The major wheat producing countries in Europe (France, Poland, Germany, Romania and Bulgaria) are seeing a significantly smaller harvest as a result of the dry summer. In short, many Australian traders see an alternative to wheat exports.

This does not apply to the barley export market. Since 2010, Australian traders have focused almost entirely on China when it comes to barley exports. A problem is estimated to be much greater for this product. Since the focus shifted to China, approximately 60% of total Australian barley exports go to China every year. This percentage is much lower for wheat. In the 2019/2020 season, about 15% of the total wheat exports were exported to China, although this is an exceptionally high score. In previous years, 10% or more had never gone to the Asian superpower.

Little fear
On the other hand, the value of wheat exports to China has remained significant. In recent years, an average of more than $300 million worth of wheat went to the Asian superpower. Therefore, losing a market the size of China is not something to be brushed aside in Australia, even if the consequences do not appear to be very significant. The export of barley remains even more important. That amounts to an average of $800 million dollars.

Yet there is little fear among Australian traders of an actual import ban, because China sources a large part of its raw materials from Australia. For example, in 2011, Australian grain traders supplied 64% of China's wheat imports. In other words: it is expected that China will harm itself if it actually continues with an import ban on wheat from Australia.