Black Sea wins Egypt wheat deal despite price rise

25.07.2013

Black Sea exporters, once again, scooped all of an Egyptian wheat tender as the top importing country took its purchases this month to 720,000 tonnes, on a day which showed buoyant world demand.

Egypt's Gasc grain authority, at its third wheat tender of July, purchased 240,000 tonnes of wheat for $63.6m, including freight,, with Romania picking up half the order and the balance split between Romania and Ukraine.

The purchases took to 720,000 tonnes Egypt's orders of wheat this month, at a total cost of some $190m, after a hiatus since February as the cash-strapped country, which is expected to import about 9m tonnes of the grain in 2013-14, ran down reserves and relied on purchases from the domestic harvest.

All the purchases have come from the three Black Sea exporters, although such a pattern is typical early in the marketing year, given their competitively-priced supplies and the relatively low cost of shipping from the region to Egypt.

Buying pressure

The average price that Egypt paid, at $252.10 a tonne excluding shipping, was actually more than $4 a tonne higher than at its last order a week ago – in contrast with a fall in prices on futures markets over that period.

Result of Gasc tender

Romanian origin: 60,000 tonnes, at $252.12 per tonne plus freight of $12.85 per tonne from Ameropa

Romanian origin: 60,000 tonnes, at $252.12 per tonne plus freight of $12.85 per tonne from Bunge

Russian origin: 60,000 tonnes, at $251.92 per tonne plus freight of $13.33 per tonne from Louis Dreyfus

Ukrainian origin: 60,000 tonnes, at $252.25 per tonne plus freight of $13 per tonne from Venus

Average cost per tonne incl freight: $265.11

Average cost per tonne excl freight: $252.10

Orders for September 1-10 delivery
Chicago wheat, the world benchmark, and the benchmark Paris contract are both down a little over 2% over the same period, despite some recovery on Wednesday fuelled by trade activity, besides a forecast from Russian farmers of a 45m-48m tonne domestic harvest, well below the official forecast of at least 50m tonnes.

Indeed, wheat exporters are seeing resilient demand, with Algeria also believed on Wednesday to have made a large purchase, of more than 400,000 tonnes, and Iraq tendered for supplies.

Buyers last week included Iraq, South Korea, Japan and, reportedly, China, which has ramped up purchases of milling wheat after a rain hit domestic harvest hurt the quality of the domestic harvest.

French prices

Despite the rise in Black Sea prices, French wheat, the only other origin offered to Gasc, did little to improve its chances of winning Egyptian business.

At $263.42 a tonne, French supplies were $3.70 a tonne more expensive than at last week's tender too, and more than $11 a tonne off the pace of the winning offers even before taking shipping charges into account.

"I think the Black Sea guys realised that there was no competition from France, and felt comfortable about putting their prices up a little," Jonathan Lane, trading manager at Gleadell, told Agrimoney.com.


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