China has become the largest market for Australian wheat.
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This year, it had big tonnage on order, but some news came out last week.
China cancelled or delayed one million metric tonnes (mmt) of Australian wheat for February to April delivery.
It is not unusual for China to cancel cargoes.
The United States Department of Agriculture (USDA) has a very good reporting system for the grain trade, and it reports on sales and cancellations.
Recently, China cancelled 500,000 tonnes of wheat from the USA, and it seems it may have cancelled 1mmt from Australia.
So why has it cancelled/delayed?
Well, it could be for any number of reasons.
The wheat market has fallen in recent months.
Do Chinese buyers hope to delay cargoes and/or washout, then buy into a cheaper market?
Is the demand for grain in China falling?
If we look at hog margins in China (see chart 1), they are in negative territory, which could signal a move to destocking.
In 2022, China imported 6.2mmt and 6.6mmt in 2023.
Australia was forecast to export 20mmt of wheat in 2024, so a million tonnes cancelled is significant.
The reality is that other buyers will swallow up any grain sold, as the shipping stem is pretty much full for the coming months.
Regardless of the reason, the news of cancellations is a bearish indicator as it signals a drop in demand for China.
In 2023, according to the USDA, China was the joint second largest importer of wheat, alongside Egypt.
The largest buyer was Indonesia.
I have been asked if farmers should consider reducing wheat acres, it is so long until harvest that I wouldn't be making decisions based on this one event.
