Contracting for Value Workshops Educates Private Chinese Buyers, Spur Spring Wheat Sales
China’s complex wheat importing rules can be a significant barrier to private purchases, but wheat imports help cover gaps in the need for high-quality wheat for a growing commercial wheat food market. USDA Foreign Agricultural Service cooperator U.S. Wheat Associates (USW) is using Market Access Program (MAP) and Foreign Market Development (FMD) program funds to educate traders and millers in ways that help overcome issues and increase private purchases of U.S. hard red spring (HRS) wheat grown in the northern plains.
Individual Chinese flour mills may privately import wheat under the government’s tariff rate quota (TRQ). Yet buying in bulk is not economically viable for individual mills because their capacity is too small. To overcome this non-trade barrier, several mills can pool TRQ purchases through private trading companies. One of those traders is Nantong Yufeng Grains & Oils Co., Ltd., which had been a steady but relatively small customer for U.S. wheat since 2013. Initially the company was only able to purchase U.S. wheat in small volume containers.
Because this trading company was ready to expand its ability to purchase wheat in bulk for its Chinese flour mill customers, USW recognized that its people needed training in how to get the most value from its tenders for bulk loads of U.S. wheat. To do that, USW brought two of Nantong Yufeng’s traders and its mill customers to “Contracting for Wheat Value” workshops in the United States in August 2014 and June 2015. This activity, developed using MAP funds several years ago, helps wheat buyers better understand and use the inspection data created by Federal Grain Inspection Service as ships are loaded with U.S. wheat. In addition to the technical training, these workshops fostered deeper contacts with Pacific Northwest (PNW) exporters. In turn, this encouraged on-going communications between this buyer and U.S. sellers, a key basis of trust, understanding and a cooperative relationship.
When Nantong Yufeng expanded its ability to handle more efficient, lower cost bulk shipments of U.S. wheat in marketing year 2015/16, the training and new relationships came to fruition. With first-hand knowledge of quality, price and contracted value, the company chose U.S. HRS over Canadian supplies. It imported HRS in two Panamax vessel loads of 57,750 metric tons (MT) each for its Chinese milling customers.
When the first shipment arrived at port, though, Chinese customs officials unfamiliar with wheat inspection and contracting questioned the importer on “dockage” level and the term “deductible from contract value.” With the knowledge Nantong Yufeng gained from the USW seminars and additional assistance from USW Marketing Specialist Shirley Lu, the trader resolved the issue smoothly. In a subsequent purchase, USW suggested that Nantong Yufeng should specify a lower maximum dockage and there were no customs issues associated with this purchase.
The workshops and local trade servicing under MAP and FMD in 2014/15 and 2015/16 helped Nantong Yufeng import 172,000 MT of HRS. Total U.S. HRS exports to China in 2015/16 were 744,000 MT — two times total sales in 2014/15 — returning substantial revenue to the U.S. wheat trade and farmers in Idaho, Montana, North Dakota, South Dakota and Minnesota.