Private exporters have canceled sales of 264,000 metric tons of U.S. soft red winter wheat destined for China, marking the third consecutive cancellation in as many business days, as confirmed by the U.S. Department of Agriculture (USDA) on Monday. This latest cancellation, the largest of the three, follows two previous cancellations totaling 240,000 tons of soft red wheat sold to China last week.
The decline in wheat prices can be attributed to China’s recent wave of U.S. wheat purchases in December, leading to heightened competition from global suppliers, especially Russia, the world’s largest wheat exporter. Improved crop conditions in the U.S. winter wheat belt have further impacted market dynamics, contributing to the price adjustments in the wheat sector.
In response to market conditions, China has expanded its budget for stockpiling grains and edible oils this year, aiming to enhance food security and reduce reliance on imports. The benchmark Chicago Board of Trade soft red winter wheat futures dipped to $5.23-1/2 per bushel following the USDA’s announcement on Monday, marking the lowest level on a continuous chart since August 2020.
The benchmark contract has experienced a 19% decrease from its four-month peak in early December, coinciding with China’s record U.S. wheat purchases during that period. Chinese importers diversified their sources by procuring French and Australian wheat last autumn after adverse weather conditions impacted China’s domestic wheat crop.
In its monthly supply/demand report released on Friday, the USDA revised down its estimate of U.S. wheat exports for the marketing year starting June 1, 2023, to 710 million bushels, representing a decrease from the previous month and marking the lowest level in 52 years. The reduction includes a cut of 10 million bushels in soft red winter wheat exports, reflecting ongoing shifts in global wheat trade dynamics.