| April 11
April 11 China's largest purchase of U.S. soft
red winter (SRW) wheat in at least nine years on Thursday should
be followed by more big purchases this year as Beijing rebuilds
depleted reserves and takes advantage of cheap imports to meet
its growing need for livestock feed, analysts and trade sources
The U.S. Department of Agriculture on Thursday said private
dealers sold 360,000 tonnes of U.S. SRW wheat to China for
shipment in the 2013/14 (June/May) marketing year. That is part
of a larger deal that was announced in China last week.
The 360,000 tonnes is the largest single-day SRW sale to the
world's top wheat producer since January 2004, USDA data shows.
In all, China's Sinograin bought 14- to 16-cargoes of U.S.
SRW last week, the China National Grain and Oils Information
Center said on Monday.. Once USDA announces the
rest of that deal, either via daily reporting or in its weekly
reports, additional sales are expected.
The rest of the Sinograin purchases may not be confirmed by
USDA's daily reporting system if the deals were routed through
sellers' foreign trading desks, which are not bound by daily
reporting guidelines, traders said. Each cargo holds about
60,000 tonnes of grain so roughly 480,000 to 600,000 tonnes
remain unconfirmed by USDA.
SRW wheat futures on the Chicago Board of Trade fell
last week to the lowest in 9-1/2 months while domestic prices in
China hovered near historic highs.
The attractive pricing was an opportunity for Beijing to
rebuild government reserves.
"As their wheat prices have rallied over the last three
months, they have been taking wheat out of reserves and selling
it to hold their domestic prices down. They're replacing that
reserve. They want that wheat in hand to fight inflationary food
values if they happen," said Roy Huckabay, analyst with The Linn
"There's talk that they've got more to buy, but the wheat
market's kind of walked away from their prices. It may take a
break in flat prices of 10 or 20 cents to get back to an area
where they are a willing buyer again," he said.
Spot CBOT wheat futures settled at $6.97-3/4 per bushel on
Tuesday, up a penny on the day but more than 30 cents above last
week's multimonth spot-contract low of $6.64 per bushel.
CHEAPER TO IMPORT
The cost of SRW wheat at U.S. Gulf export terminals fell
earlier this year to a discount of nearly $140 per tonne to
Chinese domestic wheat prices, the largest ever price difference
according to Reuters records that go back to 2004. That price
difference more than offset U.S. Gulf to China shipping costs of
around $40 per tonne.
Concerns that adverse weather in China could trim its wheat
and corn crops suggest that trade forecasts for modest increases
in imports of both grains in the coming season were understated,
The size of China's grain stockpile is a closely guarded
state secret, but traders say supplies have been reduced enough
that Beijing would make big import purchases if prices fall to
"Some believe that this is the first of a number of
purchases that are going to occur over a number of months to
start to replenish their drawn-down stocks situation," said Kent
Beadle, grain market analyst with CHS Hedging.
"They're going to look buy corn later on when prices are
discounted as a lot of folks believe that there's more downside
to corn prices in the new-crop slots," he added.
China typically imports mostly higher grade wheat such as
U.S. hard red spring or Canadian spring wheat to "blend up"
lower grade domestic wheat. But increased feed needs and high
corn prices have boosted demand for lower-grade and
less-expensive wheat such as SRW.
Wheat imports by China in the 2012/13 season were forecast
at 3.2 million tonnes, up from 2.933 million tonnes the previous
year and the highest since 2004/05 when imports hit 6.747
million tonnes, according to USDA's Foreign Agriculture Service.
Many analysts believe China may import 3.5 million tonnes in
the upcoming 2013/14 season, possibly more. But few believe its
wheat import program could challenge levels seen in the
late-1980s to early-1990s when Beijing regularly imported 10
million tonnes or more.
(Editing by Bob Burgdorfer)