Egyptian wheat purchase highlights big premium for US supplies

06.07.2017

Egypt's Gasc extended its rapid start to the season for wheat orders by purchasing a further 410,000 tonnes of the grain, at a tender which indicated a huge premium on US prices, following their drought-driven rally.

Gasc, grain authority for the world's top wheat-importing country, bought 350,000 tonnes of Russian wheat, and 60,000 tonnes of Romanian supplies, for a total of some $88m, including freight charges.

The purchase took to 1.43m tonnes the amount of the cereal Gasc has already purchased for delivery in 2017-18 with the season only five days old.

Typically, the authority makes a slower start to the season, relying on supplies purchased from the domestic harvest.

However, there has been some talk of a disappointing harvest this year, although this is not borne out by crop estimates from the likes of the International Grains Council and the US Department of Agriculture.

Still, the IGC, citing a "stronger pace of new season buying", last week raised by 200,000 tonnes to 12.1m tonnes its forecast for Egypt's overall wheat imports this season, a result which would represent a rise of 700,000 tonnes year on year.

Big day for wheat purchases

Algeria also bought wheat, purchasing a reported 420,000 tonnes of milling supplies at costs of $213.75-216 a tonne including freight, hours after USDA staff flagged the prospect of strong imports by the country this season, following drought damage to yields.

The bureau raised by 200,000 tonnes its forecast for Algerian wheat imports in 2017-18, taking the figure to a record high of 8.2m tonnes.

The purchases by the North African importers made Wednesday a strong day for demand for the grain, despite the rise in prices spurred by dryness in the likes of North America, Australia and parts of the Ukraine.

The Algerian purchases are believed to have been mainly of French supplies, with Argentina a potential origin too.

Have US prices overshot?

However, details of the offers to Gasc underlined that price gains had been unevenly spread.

While winning offers of Russian grain from merchants Aos and Daewoo came in below $200 a tonne excluding freight - up only $2-3 a tonne from values at the previous tender, two weeks ago – Louis Dreyfus offered US hard red winter wheat at $255 a tonne.

That represented a further in prices from the $247 a tonne at which they ended June, according to data from the UK's HGCA bureau.

"Better quality may have some part to play in the higher price for the hard red winter wheat, but it does raise the question of whether US values have gone high enough, or even too high, for now," a European grain trader told Agrimoney.com.

Still, while Kansas City hard red winter wheat futures spent much of Wednesday in negative territory, they recovered to close up 1.8% at $5.69 Ѕ a bushel for September delivery, the highest for a nearest-but-one contract in two years.

Harvest pressure ahead?

Earlier on Wednesday, Agritel flagged that Black Sea merchants were "cautious" over lifting cash prices of wheat, despite the rally in futures in major markets.

Agritel flagged concerns that "wheat supply will be bigger on the next weeks" as Black Sea harvests expand, meaning that "traders are waiting before rising forward prices".

The average price that Gasc paid for wheat at tender hit $200 a tonne on Wednesday, excluding freight, for the first time since November 2015.

A year ago, the authority was purchasing Russian and Ukrainian wheat at less than $165 a tonne excluding freight.
    


agrimoney

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