Australian trade downplays talk of 1Mt China wheat cancellations

Liz Wells March 20, 2024

A grain train empties at Port Kembla in NSW, one of several ports which has been shipping wheat in volume to China in recent times. Photo: NSW Ports

TALK that China has cancelled 1 million tonnes (Mt) of current-crop Australian wheat appears to have little basis in fact, according to grain industry sources Grain Central has surveyed.

The sources represent some companies with cargoes of wheat loaded, loading or about to load wheat for China, and totalling close to 400,000 tonnes in the second half of March.

This shows a drop in pace from close to 1Mt shipped in January, and a further slowdown appears possible in coming months as traders say China is deferring rather than cancelling cargoes booked late last year.

“There have definitely been a couple of cancellations…but that (tonnage) was resold pretty quickly,” one industry source said.

“The rest of the talk is mainly minor deferrals and a misunderstanding/exaggeration by some in the media around cancelled shipping slots.”

Trade sources say the volume of national cancellations at 1Mt could be ten times more than the reality at this point in time, and a number of exporters shipping wheat to China this month say cargoes are on track to discharge as per contract terms.

Big programs from WA, Vic

Western Australia is Australia’s biggest wheat-exporting state, and trade sources say China has slowed its delivery pace on WA wheat in particular in recent weeks.

“The market’s talking up to 1Mt from first quarter to third quarter; maybe that explains why the WA market dropped $30/t a couple of weeks ago,” another source said.

This is perhaps a counter to the public push from CBH, WA’s major bulk handler and exporter, to front end its shipping into the six months to March, the first half of the Australian shipping year, in order to avoid competition from Northern Hemisphere grain.

Tempering that is a 2023-24 WA wheat crop estimated by the Grain Industry Association of WA at 7.65Mt, down from a record 13.93Mt in 2022-23.

“WA will only have wheat by the end of April for Korea, Japan and its joint ventures in South-east Asia,” the source said.

The dry finish also saw WA’s wheat harvest have a higher-than-normal protein profile.

This increases its appeal to flour and stockfeed millers in a range of export markets and not just China, which has been particularly active on the unusually low-protein Victorian crop, where a run of front-month exports may be adding to the China glut.

A further industry source said China is rumoured to be managing logistical issues at port, where stocks are building up, possibly in response to its slowing economy, and short-term oversupply of imported wheat.

Price drop a factor

As the world’s biggest forward buyer of wheat in some marketing years, this one included, it also shows China is prepared to pay a cancellation fee on some cargoes and get better value at buying now the world market has dropped considerably.

“The Chinese bought in November and December when the market was US$70/t higher.”

In its Wheat Outlook: March 2024, the USDA has reported China’s cancellation on March 7 of 130,000t of US Soft Red Winter wheat, and a 1Mt drop to 11Mt in China’s total 2023-24 wheat imports from the figure seen in February.

On March 8, USDA reported a further 110,000t of SRW wheat to China being cancelled, and the trade globally is saying 500,000t of US wheat, and some from France also, has been cancelled by China.

Australian cargoes look like they have been deferred to the end of the June quarter, and possibly pushed into the September one.

“The Americans got cancelled; rolling’s better than cancellation.”

Signs of bottom

A further source said talk of China cancelling wheat cargoes from several origins has been in the market since January, and all the bearishness has been factored into the near term.

It means domestic consumers in Australia are starting to step back into the market, as are hand-to-mouth buyers in South-east Asia.

“Asian buyers are price buyers; if the market was US$350 (cost and freight), and it’s back to $240 or $250, they’re back in.”

This source said the A$10/t bounce in ASW wheat prices indicates that the floor has indeed been hit.


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