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By Naveen Thukral

SINGAPORE (Reuters) -Chinese wheat importers have cancelled or postponed about one million metric tons of Australian wheat imports, trade sources with direct knowledge of the deals said, as growing world stockpiles drag down prices.

The moves come after the U.S. government reported cancellation of more than 500,000 metric tons of U.S. wheat exports last week to China, the world's No. 1 buyer, with international prices trading close to three and a half year lows.

"Chinese buyers have cancelled some deals for Australian wheat, and they are also moving the shipping time from the first quarter to the second quarter, third quarter," said one Singapore-based trader at an international trading company, which sells Australian wheat to Asia.

Sources said the steep decline in prices is the most likely reason for China's cancellation of Australian and U.S. cargoes, with some citing oversupply in the country's domestic market following large imports.

A second trader in Singapore said trading companies have vacated shipping slots across several Australian ports, which were booked for cargoes to be shipped to China. Both traders declined to be named because of the sensitivity of the matter.

Benchmark Chicago wheat futures have dropped more than 14% in 2024 to their lowest since August 2020, thanks to the ample world supplies. The market was trading down 1.5% at 0708 GMT on Thursday.

Russia, the No. 1 exporter, is flooding the global market with cheap wheat as it draws down inventories ahead of an expected bumper harvest.

Refinitiv data shows benchmark Russian wheat export prices slipped below $200 a metric ton ($5.44 per bushel) this week for the first time since August 2020, marking the lowest early March price since 2017.

Russia is projected to export a record 51 million metric tons of wheat in the crop year that ends on May 31, up from 47.5 million a year ago, the U.S. Department of Agriculture (USDA) says.

One million metric tons of wheat would require about 15 Panamax-size vessels of 68,000 tons each to ship, and amounts to more than 4% of Australia's expected total wheat exports of 23 million metric tons in 2023-24.

China, the biggest buyer of Australian wheat, could have booked these cargoes four to five months ago when prices were higher, said Andrew Whitelaw at agricultural consultants Episode 3 in Canberra.

"Cancelling cargoes is a bearish indicator," Whitelaw said "Whether they are doing it to buy again cheaper or because there's less demand, it is still a bearish view on the market."

The second trader in Singapore said some of the Chinese importers who cancelled or postponed purchases have agreed to pay penalties in the form of carrying cost to Australian suppliers.

A Dubai-based grain trader, who declined to be named because of the sensitivity of the matter, said one miller in the Middle East bought a cargo of Australian wheat for shipment in early April without having to wait.

"It wouldn't have been possible before China's move to postpone shipments, as Australian shipping slots were fully taken up," the trader said.