Posted on 04/11/2024 10:22:44 AM PDT by EBH
TOKYO -- The global wheat market has been hit by Chinese buyers canceling major shipments, seemingly in an attempt to secure better prices and bolster the country's food security.
Benchmark Chicago wheat futures are trading at about $5.50 per bushel, up slightly from a three-and-a-half-year low marked in mid-March but down about 10% from the beginning of the year.
The U.S. Department of Agriculture last month said 504,000 tonnes of wheat sales to China had been canceled. The figure is equivalent to about half the total U.S. wheat shipments to China in 2022 and the largest cancellation on record going back to 1999.
About 1 million tonnes of Australian wheat exports to China have either been canceled or postponed as well, Reuters reports.
China is the world's largest grain importer. Buyers there have yet to provide a reason for the cancellations.
Although China is facing an economic downturn, the price of food generally suffers less from economic fluctuations than the price of crude oil, copper and other industrial materials.
"Buyers likely are trying to avoid going through with expensive contracts signed in the past, and are repurchasing at lower prices," said Ruan Wei at Japan's Norinchukin Research Institute, echoing a common view among market watchers.
Demand for food-grade wheat imports grew in China after last summer's flooding in Henan affected harvest quality in the leading wheat-growing province. Chinese buyers appeared to have responded by securing large-scale contracts for high-quality wheat from Australia, Canada and the U.S.
But Russia, the world's largest exporter of wheat, later ramped up cheap shipments after its second straight bumper crop. Benchmark Chicago wheat prices are now about 30% below a July 2023 peak.
By the time deliveries from additional wheat contracts began reaching China, their prices appear to have been significantly above market rates, which in turn likely triggered the cancellations.
China has not increased imports of Russian wheat, which does not meet its requirements. It is instead buying more wheat from France and Kazakhstan.
Chinese buyers are known to be particularly sensitive to price shifts. In spring 2023, they abruptly canceled 1.1 million tonnes in purchases of U.S. corn. They were later reported to have increased imports from Brazil instead, as a bumper stock there drove down prices.
"Chinese moves to curb grain imports are likely to persist over the medium- to long-term," said Li Xuelian, a senior analyst at Marubeni Research Institute
The Chinese government has focused more on food security since last year amid surging prices at home and tensions with the U.S. A food security law is set to take effect in June to help bolster domestic production of grains and diversify imports.
China aims to eventually be fully self-sufficient on wheat and rice in particular, resulting in greater pressure to curb imports of these grains compared with corn and other grains mainly used for animal feed.
Yep.
If there’s not a war and election cancellation.
5.56mm
Benchmark Chicago wheat futures are trading at about $5.50 per bushel...
When they need food, raise the prices to 9.95 per bushel and tell em not to eff with us again.
How is this “out of control”? What’s so unusual about cancelling an existing contract to look for the same commodity at lower prices?
Let them eat rice! Oh, wait...
I see election cancellation d/t war speculated upon in comments here frequently.
What does anyone here think it would REALLY take to effect a cancellation of elections? DId we not have elections during the US War between the States? (War of Northern Aggression)?
Did we cancel the elections in WW1? WW2? Korea?
From whom ever China buys their wheat it definitely won’t be paid in US dollars leading to more de-dollarization and inflation for us!
Correct
These are different times.
5.56mm
“ How is this “out of control”? What’s so unusual about cancelling an existing contract to look for the same commodity at lower prices?”
Exactly, likely more drama creation by someone writing a article
See post 10.
5.56mm
Russian grain being shipped through Kazakhstan. The farms in .kz are also owned by Russian oligarchs.
👍💯
They are going to buy wheat from Russia and Ukraine and they are going to pay in yuan.
they are going to pay in YAWN ?
“What does anyone here think it would REALLY take to effect a cancellation of elections?”
What would it take to shut the country down for a flu-like illness that killed less than 1% of the population and many of those deaths were likely due to the government mandated hospital only treatment of ventilation with remdesivir instead of inexpensive Ivermectin being used successfully across the planet.
We learned the population will submit with barely a whimper.
American agricultural science has created agricultural techniques, machinery and seeds for grain crops that have resulted in bountiful harvests in some of the most challenging terrain and climates in the world. The fact is that thanks to America’s historic contributions overt famine is no longer common. That the Chinese are able to shop for cheaper prices is not a threat but a tribute to capitalism and American ingenuity.
IMHO this article isn’t about drama. It’s financial website (with mainly an Asia view). This news matters to people who trade in wheat futures.
Maybe China can’t afford it
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