Chinese wheat importers have cancelled or postponed about one million tonnes of Australian wheat cargoes, said trade sources with direct knowledge of the deals, as growing world stockpiles drag down prices.
The news comes after the U.S. government recently reported cancellation of more than 500,000 tonnes of U.S. soft red winter wheat exports to China, the world’s No. 1 buyer. International prices of the grain are trading close to three-and-half-year lows.
China increased wheat imports last year after adverse weather damaged its crop. It bought mainly Australian, U.S., French and Canadian cargoes.
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Prices subsequently plunged when Russia, the world’s top wheat exporter, began flooding the global market with cheap wheat as it drew down its inventory ahead of an expected bumper harvest. That could mean China will look to buy again to lock in lower prices, traders said.
“Chinese buyers have cancelled some deals for Australian wheat, and they are also moving the shipping time from the first quarter to the second quarter, third quarter,” said one Singapore-based trader at an international trading company, which sells Australian wheat to Asia.
A second Singapore trader said trading companies have vacated shipping slots across several Australian ports, which had been booked for cargoes bound for China. Both traders declined to be named due to sensitivity of the matter.
Benchmark Chicago wheat futures have fallen more than 14 per cent in 2024 to their lowest since August 2020 due to ample world supplies.
‘Bearish indicator’
China, which is Australia’s biggest wheat customer, may have booked the cargoes four to five months ago when prices were higher, said Andrew Whitelaw of agricultural consultants Episode 3 in Canberra, Australia.
“Cancelling cargoes is a bearish indicator,” Whitelaw said. “Whether they are doing it to buy again cheaper or because there’s less demand, it is still a bearish view on the market.”
Refinitiv data shows benchmark Russian wheat export prices slipped below US$200 a tonne ($5.44 per bushel) in the second week of March for the first time since August 2020, marking the lowest early March price since 2017.
Russia is projected to export a record 51 million tonnes of wheat in the crop year ending May 31, up from 47.5 million a year ago, according to the U.S. Department of Agriculture.
The second trader in Singapore said some of the Chinese importers who cancelled or postponed purchases have agreed to pay penalties in the form of carrying cost to Australian suppliers.
A Dubai-based grain trader, who declined to be named, said one miller in the Middle East bought a cargo of Australian wheat for shipment in early April without having to wait.
“It wouldn’t have been possible before China’s move to postpone shipments, as Australian shipping slots were fully taken up,” the trader said.
