January 9, 2012
France recovers wheat trade with top buyer
Wheat exports from France to Egypt, its top buyer, resumed with its biggest order for nearly a year, helped by the continued weakness of the euro.
US wheat returned into contention too, proving cheaper than Black Sea supplies, excluding freight.
Egypt's state grain buyer, the General Authority for Supply Commodities (Gasc), bought 120,000 tonnesof wheat from France following its latest tender.
A further 120,000 tonnes was split between Black Sea origins, which have until late last year set the pace in regional wheat exports, following bumper crops which have allowed them to fulfil their reputation as competitive shippers.
Indeed, with Russia holding a stranglehold over Egyptian trade until late last year, following a bumper harvest this year, the order of wheat from France was the biggest from the EU's top exporter since February.
The success of French wheat was seen as in part a reflection of the weakening euro, which fell on Friday (Jan 6) to its lowest against a basket of currencies for at least six years, sapped by continued fears over the eurozone debt crisis.
"The currency factor put French wheat on the front foot, when going into Christmas it had already shown it was getting closer into contention," a UK grain trader said.
While Egypt paid 9.8% more, excluding freight, for its wheat than in its last tender, three weeks ago, with prices lifted by the boost that South American drought fears have given the grains complex.
However, the result was also seen as a reflection of the waning competitiveness of Russian wheat, with the depletion of silos nearer to Black Sea ports, forcing merchants to seek supplies further afield, with higher transport costs.
A government intervention programme has also supported Russian prices.
Furthermore, Friday's tender sheet was notable for containing only one bid from Argentina, and at US$250 a tonne, more than 10% above prices offered in mid-December, when the South American country was competing hard for and winning - orders even into the Mediterranean.
The South American country is set later this month to scrap tight controls over wheat sales, a factor which may have encouraged merchants to hold-off cut-price offers.
"Argentina's poor weather may be causing people to think twice about selling cheap too," the grain trader said.
Allendale, the US broker, forecast that feed demand unfulfilled by a disappointing South American corn crop may switch to Argentine feed wheat, rather than US corn.
However, US soft red winter wheat, the type traded in Chicago, returned into contention at the Egyptian tender, being priced at US$255.65 a tonne, below all but one tender from the Black Sea.
US wheat has been in recent months noticeable by its absence from Egyptian tenders, with what offers there have been uncompetitive even before factoring in the extra shipping costs involved in getting the grain across the Atlantic.