August 4, 2011


Egypt seeks more wheat sources on rising Russian grain prices



Egypt, the world's biggest wheat importer, is looking for more sources for the grain after prices paid for Russian wheat climbed almost 5% in less than a month.


The state-run General Authority for Supply Commodities (GASC) bought Russian wheat for US$243.50 a tonne on July 7, its first purchase following the expiration of a ban on grain exports from Russia. The authority paid US$255.25 at its latest tender on July 29.


"The price of Russian wheat has been going up gradually, tender after tender," Vice Chairman Nomani Nomani told Bloomberg. "So we are now urging other source countries to increase the competition and decrease their prices, and we are also seeking to expand our list of approved import sources."


GASC is considering restoring Romania and Ukraine to a list of approved sources, that also includes the US, France, and Australia, Nomani said.


Russia accounted for more than half of Egypt's wheat imports before it barred all outbound cereal shipments on August 15 2010, resulting in Egypt being deprived of 590,000 tonnes of wheat from Russia in the year through June 2011, according to Nomani.


Nomani added that Russian wheat prices were rising due to high demand, which stemmed from its original low prices.


"We want to diversify origins to prompt competition and prevent monopoly, in order to get the best quality for the best prices," said Nomani.


GASC buys 5-6 million tonnes of wheat a year for Egypt through international tenders because local production is insufficient to meet demand. The wheat is used to make subsidized bread.


Russian wheat is discounted to other nations' grain by as much as US$50 a tonne, the most in at least four years, according to the Moscow-based Institute for Agricultural Market Studies (IKAR). Russian wheat normally costs US$10-15 a tonne less than French grain.


"Russian traders have cornered themselves on prices," IKAR analyst Oleg Sukhanov said July 29. "Traders competed with each other, trying to sell as much as possible. The only competition Russia has now is with Russia itself. The price should be about US$300 a ton, based on supply and demand picture."


Russian wheat's discount may "easily" narrow to US$25-30 a ton by the end of this month or early September, said Peter Biermann, general manager of export operations at Aston FFI, a trading unit of Russian grain and oilseed producer OAO Aston. Aston will supply 60,000 tons of wheat to Egypt, the results of the July 29 tender show.


"I think we can compete with quality and cheaper prices," Biermann said from Lausanne, Switzerland, on July 29. "Clearly it's the price of Russian wheat which is unbeatable at the moment, at least."

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