By Karl Plume
July 3 (Reuters) – China’s largest U.S. wheat purchase in three months, confirmed by the U.S. Department of Agriculture on Wednesday, ignited the strongest wheat futures rally in two weeks on ideas that Beijing would need further imports to supplement its rain-damaged crop, analysts said.
The 360,000-tonne purchase of U.S. soft red winter wheat for shipment in the 2013-14 (June/May) marketing year was the biggest single-day purchase since a 480,000-tonne deal was announced on April 15.
State stockpiler Sinograin was the buyer, although traders said state-owned trader COFCO has also made recent purchases.
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The latest sales were for shipment between August and February, U.S. traders said.
The world’s largest wheat producer also booked purchases from Australia this week and from France two weeks ago. Traders said Chinese importers have also been eyeing Canadian wheat as untimely rains at harvest damaged some 10 million tonnes of China’s crop.
“They have some production and quality issues with their wheat crop this year and they’re going to have to bring outside supplies in for blending purposes and for outright needs given some of the production losses that they’ve suffered,” said Shawn McCambridge, analyst with Jefferies Bache.
“They’ll continue to come into the market to make purchases, but I don’t think they’ll be willing to chase prices higher.”
Pressured by an advancing harvest and reports of bigger-than-expected yields, spot SRW wheat futures on the Chicago Board of Trade hit a one-year low this week after eight straight sessions of declines that slashed prices by nearly 9 percent.
China’s April purchases followed an almost 10 percent price drop.
Traditionally self sufficient in wheat, China is already expected to import 3.5 million tonnes from all origins this season, its largest volumes in nearly a decade, according to USDA. Some private analysts say volumes could ultimately reach 10 million tonnes, the most since the mid-1990s.
“There’s no doubt that USDA will be adjusting their import total for China on this upcoming July report,” said Rich Nelson, chief strategist with Allendale Inc, referring to the supply and demand report scheduled for release on July 11.
“I think they’ll take a small step in July, reach up to five (million tonnes) in August and then decide what to do from there. I know there’s talk about 10 million, and it’s not out of bounds, but I don’t think it will happen any time soon.”
Spot CBOT wheat jumped 8-1/4 cents, or 1.3 percent, on Wednesday to $6.57-3/4 per bushel.
