What is a sales agreement with a Chinese importer worth? Many traders will ask that question. Yesterday there was uncertainty about whether or not to cancel Chinese orders from France. Today it was announced that Chinese importers are abandoning Australian wheat now that prices are significantly lower than a few months ago.
The May wheat contract on the Matif closed yesterday €2 lower at €194,75 per tonne. On the CBoT, the May wheat contract lost 0,6% to $5.44¼ per bushel. Corn moved mostly sideways, closing 0,1% lower at $4.41¼ per bushel. Soy showed a modest increase of 0,1% to $11.96¾ per bushel.
Reports about cancellations of wheat orders by Chinese importers caused confusion yesterday. Market participants at the monthly meeting of FranceAgriMer talked about Chinese orders that were canceled. It was not clear whether it was French or American wheat. Yesterday the USDA did not release any information about cancellations of Chinese orders. Some players therefore thought it was a matter of the cancellation of the delivery of French wheat. Later, FranceAgriMer announced that the earlier reports of cancellations were from the US. The French wheat stock is the largest in nineteen years.
Postponement and adjustment
Reuters reported this morning that China has canceled or postponed the delivery of approximately 1 million tons of wheat from Australia. “Chinese buyers have canceled a number of deals for Australian wheat and are also shifting shipping time from the first quarter to the second quarter and third quarter,” Reuters quoted a trader who wished to remain anonymous. According to Reuters sources, the sharp drop in wheat prices in recent weeks is likely a reason to cancel or postpone wheat purchases that have already been made. In addition, the Chinese market would be oversupplied by large imports.
Despite the commotion caused by China, wheat is still traded on the world market. Taiwan has reportedly secured 120.000 tons of feed wheat in a tender. Prices range from $243 to $245 per tonne C&F (free). The country of the supplier has not been disclosed.
The American broker Allendale yesterday issued a forecast for the corn and soy acreage in the US. Allendale expects 93,5 million acres of corn and 85,8 million acres of soybeans to be planted for the upcoming harvest. The corn area is therefore 1,2% smaller than last season and 2,7% more soy is sown. Soya is price-wise more interesting for American arable farmers according to Allendale. It should be noted that it is still early in the season and farmers are making different choices because of the weather, for example. In the southern Midwest and in the Mississippi Delta, early corn sowing is already in danger of being postponed due to forecast rain.