Egypt's Gasc turns to Black Sea, again, for wheat order

16.01.2017

Egypt's Gasc began 2017 where it ended off last year – buying 235,000 tonnes of Black Sea wheat at tender, and continuing to accelerate purchases ahead of the year-ago rate.

The state grain authority for the world's top wheat-importing country purchased 235,000 tonnes of the crop on Saturday, mainly from Russia, but with one Romanian cargo ordered too.

The purchase followed a December 29 tender at which Gasc bought 235,000 tonnes of wheat, comprising three cargos of Russia crop and one of Ukrainian origin.

The order took Gasc's wheat purchases at tender so far in 2016-17, which began in July, to 3.41m tonnes, at a cost of nearly $650m, ahead of comparable buying of 2.95m tonnes as of early January last year.

The quicker rate of purchases comes despite a slow summer for buying, as Egypt was effectively blackballed by merchants over a zero tolerance policy on contamination of cargos with ergot - a widespread fungal residue which is difficult to guarantee as absent from supplies.

Prices nudge higher

Gasc paid a little more this time for its wheat, with the grain costing an average of nearly $200 a tonne including shipping, up $2 a tonne from the price at the auction two weeks ago.

Gasc wheat purchases at tender, January 14

60,000 tonnes of Romanian wheat from Cerealcom at $189.65 a tonne plus $10.70-a-tonne freight

60,000 tonnes of Russian wheat from Grainbow at $187.50 a tonne plus $11.39-a-tonne freight

60,000 tonnes of Russian wheat from Olam at $187.95 a tonne plus $11.39-a-tonne freight

55,000 tonnes of Russian wheat from Glencore at $188.34 a tonne plus $12.30-a-tonne freight

Shipping charges were a touch more expensive too, in line with a recovery in fees for big bulk goods ships, with the Baltic panama index soaring 22% so far in 2017, a rise attributed to factors including poor weather and Chinese pollution which created a backlog of ships waiting to be unloaded.

However, the increase also reflected rising wheat prices, with Gasc paying roughly $1.50 a tonne more this time.

Russian values have been swollen by appreciation in the rouble, which hit an 18-month high last week against the dollar, helped by firmness in oil markets, to which the country, as a big producer, is particularly exposed.

Competitive positions

Still, the rise in prices paid by Gasc lagged the recovery in Chicago futures, the world benchmark, where values have risen some 5% since December 29, on a spot contract basis.

The rally has been helped by factors including data showing a deterioration in the condition of US winter wheat and, on Thursday, data showing US plantings of the grain had fallen to their lowest since 1909.

However, the particular rise in prices of US wheat have provoked ideas that it is losing competitiveness on world export markets, and indeed could even be supplanted by imports at home.

Joe Lardy at CHS Hedging flagged talk of "European Union feed wheat pencilling in to the US as domestic values here are just too expensive to be overly competitive right now".

Absent origins

Indeed, no supplies of US wheat were tendered to Gasc, with no offers either of European grain which, after a poor harvest last year in key producer France, are somewhat squeezed, at least for milling supplies.

Nor was wheat from Argentine offered despite, thanks to lowball offers, having won orders from Gasc in the run up to Christmas.

Russia is by far the biggest origin for Gasc wheat purchases this season so far, winning orders totalling 2.4m tonnes.

France, a big origin for Gasc purchases last season, has been sidelined thanks to the poor quality, and quantity, of last year's crop.
 


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