Around one million metric tonnes of Australian wheat shipments have been cancelled or delayed by Chinese wheat importers, according to trade sources with firsthand knowledge of the agreements, as rising global inventories drive down prices.

The announcement of the actions follows the announcement last week by the US government that more than 500,000 metric tonnes of US wheat exports to China, the country’s top importer, had been cancelled. At the time, global wheat prices were hovering around three-and-a-half-year lows.

After unfavourable weather devastated its harvest the previous year, China increased its imports of wheat, primarily from Australia, the United States, France, and Canada.

But after that, prices fell as the world’s top exporter, Russia, started to dump cheap wheat on the market in anticipation of an abundant harvest. This may mean China would try to repurchase in order to lock in cheaper prices, according to traders.

“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.

According to a second trader from Singapore, trading companies have released shipping slots in many Australian ports that were reserved for cargo that was scheduled to arrive from China. Due to the delicate nature of the situation, both merchants asked not to be identified.

Standardisation Thanks to plentiful global supplies, Chicago wheat futures have dropped more than 14% in 2024 to their lowest level since August 2020. Thursday at 09:06 GMT saw a 1.4% decline in the market.

According to Andrew Whitelaw of agricultural consultants Episode 3 in Canberra, China, the largest consumer of Australian wheat, may have scheduled the shipments four to five months ago, when prices were higher.

“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.”

For the first time since August 2020, benchmark Russian wheat export prices fell below $200 per metric tonne ($5.44 per bushel) this week, according to Refinitiv data. This is the lowest price since 2017 for early March.

According to the U.S. Department of Agriculture, Russia is expected to export a record 51 million metric tonnes of wheat in the crop year that ends on May 31, up from 47.5 million metric tonnes the previous year.

A million metric tonnes of wheat would require roughly fifteen Panamax-sized ships, each weighing 68,000 tonnes, to transport. This would account for more than 4% of Australia’s projected 23 million metric tonnes of wheat exports in 2023–2024.

According to the second dealer in Singapore, a few Chinese importers who cancelled or delayed deals have consented to reimburse Australian suppliers for carrying costs as a type of penalty.

According to an anonymous grain merchant from Dubai, a miller in the Middle East purchased a cargo of Australian wheat for export in early April, eliminating the need for a waiting period.

“It wouldn’t have been possible before China’s move to postpone shipments, as Australian shipping slots were fully taken up,” said the trader.

(Adapted from Reuters.com)

Categories: Economy & Finance, Entrepreneurship, Geopolitics, Regulations & Legal, Strategy