September 2, 2010

Egyptian tender supports US wheat prices

US wheat prices jumped 3.5% in Chicago after a clean sweep in an Egyptian tender-a second notable export victory within a day-spurred talk of America's growing grip on shipments.

Wheat for September added 23 cents to US$6.75 ½ a bushel, with the December lot making similar headway to US$7.08 ¾ a bushel. The rises followed the award by Egypt, the world's top wheat importer, of all 225,000 tonnes of its latest tender to the US.

The tender, for hard red wheat, excluded France, Egypt's main wheat source since the shut down on shipments from the drought-hit Russia. France is a soft wheat supplier. However, while wheat from Australia, Canada and Germany was also invited for the tender, no offers from these countries were submitted.

Analysts noted that even the EU, normally a big wheat exporter, may be forced to go to the US for higher quality wheat, after an unnamed German miller was revealed late on Tuesday (Aug 31) to have bought 20,000 tonnes of high protein wheat from America.

The order was America's first order of non-durum wheat from Germany in three years, and the biggest for nearly a decade.

Traders added that Egypt's purchase, with Tunisia also in the market, and Iraq trailing tenders from next month, was also viewed as a sign that price drops, as Chicago suffered on Tuesday, were luring out buyers.

Also, wheat's late slump in the last session had been seen as particularly harsh, and was inspired by unnatural pressure from end-of-the-month fund selling.

However, this was in part reversed on Wednesday, with US Commodities reporting that "it is the beginning of the new month and funds are entering the market."