China buys Australian wheat, catches trade off guard

24 Jan 2020 | Masha Belikova

China has booked as many as nine cargoes of Australian standard wheat (ASW) for March-May delivery since the end of December, catching a market that had been waiting for US wheat sales to China off guard.

Traders told Agricensus on Friday that Australian exporters have sold as much as 500,000 mt in recent weeks, with China’s buying coming despite hefty cuts to local output that have sent prices soaring.

“Unexpected for everyone except China I think… China obviously needed it,” an Australia-based trader said.

The buyer was believed to be Cofco, with sellers thought to include Glencore and Graincorp.

The recent sales are equivalent to 6% of the USDA’s 8.4 million mt export forecast for the 2019/20 marketing year, a figure that some in the trade had initially treated with scepticism after Australian output fell to a 13-year low following its driest year on record.

The drought cut the supply of lower protein wheat grades used for animal feed such as ASW, making it difficult for exporters to secure volumes of the crop and pushing prices higher.

Agricensus assessed ASW for March loading at $274/mt FOB W Australia on Thursday evening, just $2/mt below the higher specification APW that is typically used for milling.

“(Australia) sold a handful of cargoes to China of ASW1 (some with a max 10.5% protein)… Strange considering we are nearly the most expensive wheat in the world," a second source said.

The deals are made even more surprising by a recent trade deal between China and the US, with wheat touted by Washington as something China would buy more of to rebalance its trade deficit with the US.

Not typically a big wheat buyer, China rarely fills its annual 9.6 million mt import quota and is only expected to buy 3.6 million mt in the 2019/20 marketing year, according to International Grains Council estimates.