Three days since China bought record tonnage of U.S. wheat and prompted the price per bushel to hit $6.491/2, price parity has returned.
Though the March wheat contract in Chicago lowered to $6.33 1/2 per bushel on December 7, it has stayed put. Comparatively, it is worlds apart from the late November low of $5.43 1/2 a bushel.
Since August, consistent wheat gains have cut off mid-2023 price fluctuations following surging world demand. China’s purchases have added momentum to this stability. By December 5, China had booked around 1 million metric tonnes of wheat, per the U.S. Department of Agriculture (USDA)’s data.
A day earlier on December 4, Chinese private firms contracted some 440,000 metric tonnes of U.S. wheat. At the time, this booking was the biggest such purchase since 2020.
Heavy rainfall, which soaked local wheat fields just before the 2023 harvesting season prompted this feverish buying by China.
Despite the export momentum, the supply situation within the United States is wanting. USDA projects that foreign sales of U.S wheat will slump to 19 million tonnes for the 2023/24 market year. This will be the lowest export figure in 52 years.
The United States has witnessed a significant production drop in wheat, with the 2023 harvest among the lowest in 5 decades.
A dry 2022-23 season in the U.S.’ Midwest led to low output in the fields this fall. Hard red winter wheat, which represents 40% of all U.S wheat, plummeted by 10 million bushels in September. This is the lowest output since USDA’s recording began in the 1973-74 season.
U.S’ export figures, on the other hand, are hardly better than the production side. Exports of wheat in November 2023 clocked 12.7 million metric tonnes but were 6% lower than in November 2022.
This is why China’s interest in U.S. soft red winter wheat has brought a sigh of relief to the American wheat industry. The private purchases began in October 3, 2023 with 220,000 tonnes followed by a second order of 181,000 a week later.
On November 22, China bought a further 110,000 tonnes of soft red winter wheat. Because of diminishing domestic supplies, this spurred a price gain spree that culminated December 4 with the 1 million-ton record purchase.
U.S. wheat prices are currently at an advantageous position following the cutting off of Ukraine’s supplies after a November 21 Odessa port strike. The Russian attack led to scarcity in cereal exports and rebounded global wheat futures.
Ultimately, world wheat prices remain unpredictable, especially after France and Russia reported impressive harvests in end 2023.