All according to plan
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.
Wheat is a commodity. It always sells for the highest price someone is willing to pay for it.
I don’t always agree with Peter Zeihan but he talks about the coming demographic collapse of China and Germany (and other places) and also focuses on the end of the global marketplace. Zeihan seems to feel that global supply chains are about to collapse. And that the US is withdrawing military protection from the sea lanes and other areas. We’re largely (not completely) self-sufficient. And we are in the process of telling the world “You’re on your own” and it’s not going to be pretty. Zeihan posts daily videos on YouTube.
Let them eat bugs.
Let them eat bugs.
They do , they eat everything
Exactly! I was incredibly disgusted with the behaviors I saw.
“ 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.”
I listen to a ag market podcast almost daily .
Buyers frequently cancel purchases if they can get a better deal .
More for the rest of us.
I’m sure there is someone who’d be willing to buy some grain.
BTTT!
Biden did that.
Is China expecting an unexpected, unforeseeable and unpredictable reduction in the number of mouths to feed?
"There *were*!"
The power brokers have no need to cancel elections:
"By means of ever more effective methods of mind-manipulation, the democracies will change their nature; the quaint old forms - elections, parliaments, Supreme Courts and all the rest - will remain. The underlying substance will be a new kind of totalitarianism. All the traditional names, all the hallowed slogans will remain exactly what they were in the good old days. Democracy and freedom will be the the theme of every broadcast and editorial. Meanwhile the ruling oligarchy and its highly trained elite of soldiers, policemen, thought-manufacturers and mind-manipulators will quietly run the show as they see fit."
- Aldous Huxley
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