The volume of wheat imports was up 66.5 per cent over the same period. For coal, the decline is a combination of protectionism and falling domestic demand.

The Chinese government has made it very clear over the past year that domestic coal producers will be given priority over their foreign rivals.

This appears to be compensation for the tougher environmental laws imposed on domestic steel mills and power producers, which have resulted in lower demand for coal.

The preferential policy was confirmed in October 2014 when Beijing slapped a tariff of between 3 per cent and 6 per cent on Australian coal imports without notice.

Since then, Beijing has also been levying a series of so called "behind the border" tariffs on Australian coal.

According to the Minerals Council of Australia, this has resulted in Australian coal shipments being subjected to far tougher "quality tests" than domestic Chinese producers. Executive director Greg Evans said the stringent quality tests had seen Australian coal cargos turned away from Chinese ports.

"We would be concerned if the quality criteria was not being applied to Chinese domestic coal in order to help local producers, as this would breach trade rules," he told The Australian Financial Review on July 1.

The net result is that imports are falling far quicker than domestic consumption.


Fewer coal ships

Over the first five months of the year China's coal consumption was down 8 per cent while imports were down more than one-third.

In absolute terms the decline is equally large. In June this year, China imported 16.6 million tonnes of coal from the likes of Indonesia and Australia, compared to 25 million tonnes the previous June.

That equates to 129 fewer coal ships (carrying 65,000 tonnes each) arriving in China each month.

Even when the China/Australia free trade deal comes into effect early next year, the situation is unlikely to improve greatly, as Beijing has indicated it will preserve local coal mining jobs at the expense of imports.

For food, the opposite is true.

China's imports of grain and flour surged 66.5 per cent to 16.3 million tonnes over the first six months of the year.

The issue for China is not a lack of wheat – it is the world's biggest producer – but a lack of high-quality wheat.


According to one trader in Sydney, China has been buying high-quality Australian wheat to mix with its southern crop which was damaged by heavy rain.

The trader said Australian Prime Hard wheat is now fetching $410 a tonne, double the premier it usually enjoys over the next highest grade.

China's does not provide a breakdown for other agricultural imports, such as beef, lamb or cotton, but the trend should be very clear.

While Beijing wants less Australian coal, it will demand more and more Australian farm products.

In light of this bigger macro-trend, it's hard to see high demand for coal from the controversial Chinese-backed Shenhua Watermark mine in NSW last week, which sits in the heart of the state's best farming country.

