USDA confirms more cancellations of US soft red wheat sales to China

Private exporters canceled sales of 264,000 metric tons of U.S. soft red winter wheat that had been booked for delivery to China, the U.S. Department of Agriculture (USDA) confirmed on Monday.

It was the third cancellation in as many business days and the largest of the three, following two cancellations last week totaling 240,000 tons of soft red wheat sold to China.

Wheat prices have fallen since China made a series of U.S. wheat purchases in December. The price break reflects strong competition from global suppliers, particularly Russia, the word’s biggest wheat exporter, and improved crop conditions in the U.S. winter wheat belt.

“China booked a few million tons of U.S. wheat at the end of last year when it was trying to secure tonnages,” said Ole Houe, director of advisory services at brokerage IKON Commodities in Sydney.

“But now, international prices have dropped, especially for those cargoes which are being offered from the Black Sea region. When China booked U.S. wheat, Russian wheat was around $230-$240 per ton and now the price is around $195 a ton.”

China last week expanded its budget to stockpile grains and edible oils this year, as it aims to reduce its dependence on imports and improve food security.

Benchmark Chicago Board of Trade soft red winter wheat futures Wv1 dipped to $5.23-1/2 per bushel after the USDA’s announcement on Monday, the lowest on a continuous chart of the most-active contract Wv1 since August 2020.

The benchmark contract is down about 19% from a four-month peak reached in early December at $6.49-1/2, around the time China’s weekly purchases of U.S. wheat hit an all-time high.

Chinese importers also made sizable purchases of French and Australian wheat last autumn after rain damaged China’s wheat crop.

In a monthly supply/demand report on Friday, the USDA cut its estimate of U.S. wheat exports in the marketing year begun June 1, 2023, to 710 million bushels, down from 725 million a month earlier and the lowest in 52 years. The 15-million-bushel reduction included 10 million bushels of soft red winter wheat exports.
Source: Reuters (Reporting by Julie Ingwersen; additional reporting by Naveen Thukral in Singapore; Editing by Bill Berkrot and Himani Sarkar)