February 1, 2011

Australian wheat exporter monitors Egypt protests

Western Australia's largest wheat carrier, CBH Group, said it was observing the political turmoil in Egypt amid fears of disrupted trade if the situation deteriorates in the country.

"We are not expecting to see any immediate effect," Tom Puddy, head of marketing at the Perth-based group's grain division, said by phone. "It could escalate further, but at this stage we are just monitoring it."

Egyptian protesters defied a curfew and demonstrated against President Hosni Mubarak for a sixth day as opposition leaders rallied around Mohamed ElBaradei, the former head of the United Nations' (UN) nuclear watchdog agency. The country, which held its most recent regular wheat tender earlier in January, is the largest importer, according to the International Grains Council.

"The problem will be if the financial markets really melt down in Egypt," Puddy said. "Your number one priority, being an exporter, is security of payment."

"Egypt has consistently been buying over the last 12 months," Michael Pitts, a commodity sales director at National Australia Bank Ltd., said from Sydney today. The unrest "should not be detrimental to agricultural commodities," he said.

Australian wheat output may reach 25 million tonnes this year with about 10 million tonnes downgraded to feed quality because of wet weather in the country's east, Bankwest, a unit of Commonwealth Bank of Australia, said in a report this month.

Egypt bought 540,500 tonnes of Australian wheat in the year to September 30, according to government data. It could seek more this year because of reduced supplies from the Black Sea region, Puddy said.

"Although there is a lot of demand going into that market, our ability to supply it with the available quality that we have got could be the constraint on how much Australia can place into Egypt," he said. Total export demand was strong for milling- quality wheat for shipment for February to May, he said.