On March 8, 240,000 metric tons of US soft red winter wheat, and by March 15, another batch, this time 264,000 tons, were canceled by . US exporters were left with the option to either hold on to the half a million tons or find alternative buyers.
Australian wheat deliveries were also affected in March, as Chinese importers either canceled or postponed around one million tons of Australian wheat shipments to the second quarter.
Andrew Whitelaw, an agricultural consultant from market analysis service Episode 3 in Canberra, , referred to the cancellation of cargoes as “a bearish indicator.”
“Whether they are doing it to buy again cheaper or because there’s less demand, it is still a bearish view on the market,” he told the news agency Bloomberg.
The fact that over half a million tons of US wheat were canceled sparked much discussion among grain traders.
According to data from the US Department of Agriculture (USDA), dating back to 1999, it was the largest canceled quantity to date.
“Those cancellations show that China can get wheat cheaper from others,” said Ben Buckner, chief grains analyst for Chicago-based AgResource Co, in an interview with Bloomberg.
The days of continuously and other seem to be over, at least for now.
According to the latest data from the US Department of Agriculture as of March 28, corn inventories rose by 13%, soybean inventories by 9%, and wheat inventories saw the highest increase at 16%.
Fair weather conditions for wheat
In addition to higher inventories, an improvement in weather conditions is also contributing to lower prices, explains Thorsten Tiedemann, CEO of Grain AG in Hamburg, Germany.
“In most regions, we had more than sufficient water supply and thus good conditions for good harvests,” he told DW, adding that the winter weather was quite different from last year when some regions experienced prolonged dry periods and other negative factors such as frost.
Tiedemann thinks that the situation is generally more relaxed than it was a year ago. “We have an overall decent corn harvest. We also have an ample supply of soybeans and soybean meal. And Argentina and Brazil will harvest a decent crop in the coming weeks,” he said.
Moreover, and will likely reach a market share of approximately 29% in the global wheat market for the fiscal year 2024/25, according to Tiedemann.
The prospects of bumper harvests
If no unexpected adverse weather events occur, China could achieve a larger and higher-quality wheat harvest this year, according to reports from market watchdog S&P Global Commodity Insights.
The commodity experts base their assumption on data from the Chinese meteorological agency from early March, which said that snowfall between January and February in the country’s key winter wheat-growing regions, Jianghuai and Jiangnan, increased soil moisture and most plants have safely passed through the winter dormancy.
Additionally, only minimal frost damage is expected in parts of those regions, S&P Global Commodity Insights reports, adding the growth stage of the crop is “largely similar to or better than the same period last year.”
But Thorsten Tiedeman thinks that “one must be cautious when looking at the wheat balance for the coming year,” and warns against excessive optimism for the global wheat supply.
“I assume that compared to previous years, we will see a reduction in inventories in the exporting countries in 2024/25. This is due in part to smaller crop expectations and a slightly increasing demand due to lower prices.”
The Hamburg grain expert believes that if there are crop failures or adverse weather events anywhere. As an example, Tiedemann mentioned a poor harvest in France where, for instance, could hit again in May or June.
“Then I believe the market could react extremely nervously again because we would be heading towards lower wheat stocks even with average yield expectations. The situation is still comfortable now, but that may not remain the case.”
This article was originally written in German.
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