August 10, 2011

 

US wheat costs fall close to Russian values

 

 

US wheat prices has dropped close to Russian values on export markets, as Egyptian officials purchased bulk grain buys above one million tonnes in six weeks.

 

Egypt said it would, after the country's sixth wheat tender since the 2011-12 season started on July 1, buy 60,000 tonnes of Russian grain.

 

The purchase took to 960,000 tonnes the total amount of wheat that Egypt, the top importer of the grain, has purchased from Russia since Moscow lifted a ban on crop exports at the start of last month.

 

Egypt's state grain buyer, the General Authority for Supply Commodities, has also bought 60,000 tonnes of Romanian wheat.

 

However, the details of the tender showed that the competitive advantage that shippers of Russian wheat have also used to win business from countries such as Jordan and Turkey over the last month has been vastly eroded.

 

The winning offer, of US$261.94 a tonne by Louis Dreyfus, was less than US$3 a tonne cheaper than the lowest bid of US soft red winter wheat from Venus - which undercut many Russian offers.

 

Russian wheat was more than US$30 a tonne less expensive than rival US supplies at the end of July, and more than US$22 a tonne cheaper even last Thursday (Aug 4) at Gasc's previous tender.

 

The discount to the cheapest French wheat was less than US$12 a tonne this time, down from more than US$26 a tonne last Thursday.

 

In practice, Russian wheat looks unlikely to lose its stranglehold on Gasc imports, given that its supplies get a head start from the lower fees for shipping to Egypt from Black Sea ports than from France or the US.

 

Furthermore, Russia's domestic wheat prices are considerably cheaper than those abroad, depressed by a need by the country's farmers, whose finances were sapped by last year's drought, to raise funds for autumn sowings.

 

However, the tender may signal that high tide has passed for the rich margins that Russian grain merchants have reaped from buying domestic grain cheap to sell at strengthening international prices.

 

"This is only a small purchase by Egypt. They might just have been testing the water," said a UK grain trader. "If so, it has told us quite a lot about where the market is. They may find they get their next wheat from Russia that much cheaper."