Chinese wheat importers have cancelled around a million tonnes of orders of Australian wheat in recent weeks in a bearish move for local wheat values.
Andrew Whitelaw, commodity analyst with Episode 3, said so far around a million tonnes for delivery from February to April delivery had been cancelled.
It comes after China also cancelled purchases of American wheat to the tune of 500,000 tonnes, while there is talk there could also be French wheat orders cancelled, although nothing has been officially confirmed.
The Chinese decision to cancel the orders comes as world markets have fallen to three and a half year lows in line with greater stocks, solid yield potential for the upcoming northern hemisphere crop and more certainty about the ability to export out of the Black Sea.
Mr Whitelaw said it was a substantial dent to Australia's export program.
"Based on a total exportable surplus of 20 million tonnes of wheat it is 5 per cent of that, so this is significant," he said.
He said the cancellations represented about 15-20pc of total Chinese imports of Australian wheat in recent years.
"China has been importing between 6-7 million tonnes of Australian wheat each year, with 6.2m tonnes in 2022 and 6.6m tonnes in 2023 so this is a substantial chunk out of what they have been doing."
Mr Whitelaw was quick to quash suggestions the move was politically motivated.
"There has been some talk this was a political decision but there is nothing whatsoever to suggest it is anything but China reacting to the market."
"It is not unusual for China to cancel cargoes, we've' seen this with the US cancellations."
"What we need to try and understand is why they have made the decision to cancel, with the most likely being that they see the market dropping further, this means cancelling the contracts would wash them out into a cheaper market."
"The other major possibility is that demand for grain in China is falling, if we look at hog margins in China, they are in negative territory, which could signal a move to destocking."
"Either way it is an important decision that will have a big impact here in Australia."
Mr Whitelaw said the tightness of shipping slots at Australian ports meant other buyers would readily snap up the newly available wheat left by China, but said overall it was still a bearish indicator for the market.
There were reports that some of the wheat due to head to China was already being sent to the Middle East instead.
Gregor Heard
Gregor Heard is ACM's national grains industry reporter, based in Horsham, Victoria. He has a wealth of knowledge surrounding the cropping sector through his 15 years in the role. Prior to that he was with the Fairfax network as a reporter with Stock & Land. Some of the major issues he has reported on during his time with the company include the deregulation of the export wheat market, the introduction of genetically modified crops and the fight to protect growers better from grain trader insolvencies. Still involved with the family farm he is passionate about rural Australia and its people and hopes to use his role to act as an advocate for those involved in the grain sector.
Gregor Heard is ACM's national grains industry reporter, based in Horsham, Victoria. He has a wealth of knowledge surrounding the cropping sector through his 15 years in the role. Prior to that he was with the Fairfax network as a reporter with Stock & Land. Some of the major issues he has reported on during his time with the company include the deregulation of the export wheat market, the introduction of genetically modified crops and the fight to protect growers better from grain trader insolvencies. Still involved with the family farm he is passionate about rural Australia and its people and hopes to use his role to act as an advocate for those involved in the grain sector.
