August 25, 2011

CBOT wheat falls as Egypt buys Russian grain

CBOT wheat weakened after three days of gains as Egypt, the world's largest importer of the grain, shunned US and EU crops in favour of the less expensive Russian crop.

Egypt bought 180,000 tonnes of Russian milling wheat at a tender yesterday for prices from US$284.17 to US$290 a tonne, said Nomani Nomani, vice chairman of the state-run General Authority for Supply Commodities. A ban on all cereal exports from Russia expired July 1 as scheduled.

"Russian grain is still relatively cheap and convenient, but there is political determination not to rely too heavily" on imports from the country, said Justine White, an analyst at VM Group in London.

Wheat for December delivery dropped US$0.0525, or 0.7%, to US$7.7925 a bushel by 11:39 a.m. London time on the CBOT. Milling wheat for November delivery traded on NYSE Liffe in Paris fell EUR1 (US$1.44), or 0.5%, to EUR206.75 (US$298.88) a tonne.

Russia barred exports last year after the nation's worst drought in a half-century cut production, causing the wheat harvest to plunge 37% from 2009. Egypt also has purchased Romanian wheat since the ban ended.

"This disruption in supply hit Egypt very hard," White said. "I think they are likely to diversify their sources after that experience."

Corn for December delivery declined US$0.0275, or 0.4%, to US$7.4075 a bushel in CBOT. Soy for November delivery slid US$0.0275, or 0.2%, to US$13.945 a bushel.

Prices also slipped as German business confidence fell more than estimated by analysts in a Bloomberg News survey. "Weak" prospects for economic growth in Japan, the top global corn importer, caused Moody's Investors Service to cut the country's debt rating. Futures indicated US equity benchmarks will retreat when trading starts in New York.

"The weakness seen this morning is not due to any change in the fundamental outlook, which remains strong, but likely a result of pressure from continuing weakness in external markets," White said.