China balks at booked wheat

In the last two weeks, Chinese buyers have canceled or delayed delivery on purchases of around 1.5 million metric tons of wheat from the US and Australia (Reuters).

Some context: China is the world's largest wheat importer, buying a record-breaking 12 million metric tons in 2023.

• These cancellations represent over 12% of recent annual import levels.

It's no mystery why buyers are balking:

• Chicago wheat futures – the global benchmark – have fallen 14% so far in 2024, returning to levels not seen since 2020.
• That means orders booked late last year are now significantly overpriced.

Why the price drop?

• First, a glut of Russian wheat is flowing onto global markets as sellers empty warehouses in anticipation of a bumper winter wheat harvest.
• Second, China's wheat crop is in great shape this year, leading analysts to revise down estimates of China's 2024 wheat imports by 2-3 million metric tons, landing just over 11 million (S&P).

Get smart: If China (the world's leading wheat grower) and Russia (the leading exporter) both harvest a bumper winter wheat crop this May, global wheat prices will remain subdued.

What to watch: State buyers often announce agricultural purchase agreements to coincide with state visits.

• Plans are underway for both Xi Jinping and Premier Li Qiang to visit major wheat exporters France and Australia in the coming months.
• That could further shake up China's purchase dynamics.