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Egypt Seen Buying U.S. Wheat in Next State Grain Tender

Egypt, the world’s biggest wheat importer, is likely to resume purchases of supplies from the U.S. in its next state grain tender, said Sadri Mathari, chief commercial officer with Venus International, the country’s largest private trader of the grain.

Egypt’s General Authority for Supply Commodities, the state grain buyer, likely has enough wheat to last until the end of this year, with the next tender occurring after the start of 2013, said Mathari, whose company trades 2.5 million to 3.5 million metric tons of grain a year. Venus operates in a free zone in the Port of Dekheila, allowing it to buy grain from the U.S., the Black Sea region and other places around the world, and sell it into GASC tenders.

“The foreign exchange factor will influence the direction of French prices, but I believe that the next tender we see in Egypt will be 50/50 U.S. and France,” Mathari said yesterday in an interview in Geneva.

Milling-wheat futures for March delivery on NYSE Liffe in Paris traded at 269 euros a ton today, equal to about $9.33 a bushel. The grain was almost 72 cents a bushel more expensive than March futures on the Chicago Board of Trade, the global benchmark, the widest price spread on record for the two contracts. Prices in Paris jumped 39 percent this year, outpacing the 17 percent increase for the contract on the CBOT, as dry weather cut supplies in Russia and eastern Europe.

Egypt hasn’t bought U.S. wheat in a state tender since a purchase of 115,000 tons in April, which included 60,000 tons from Venus, according to data compiled by Bloomberg. Supplies from Russia and eastern Europe dominated imports until September, when the north African country began purchasing more French supplies.

Egyptian Imports

The U.S. Department of Agriculture estimates that Egypt will import 9.5 million tons of wheat in the 2012-13 season, the least since 2007-08 and down from 11.65 million tons in 2011-12. Total imports may be closer to 7.5 million tons, because the country has increased domestic production, Mathari said.

Venus has a terminal that can unload Panamax vessels, the largest to transit the Panama Canal, containing wheat, corn and protein meal on two berths. It has 400,000 tons of storage capacity, after expanding its facilities this year. The company, which is headquartered in Cairo, plans to ship grain into the broader Middle East and north African region in 2013, boosting trade to 5 million tons annually in the next five years, he said.

U.S. Shipments

The U.S. exported 150,400 tons of wheat to Egypt in the marketing year which began June 1 through to Nov. 8, down from 246,700 tons at the same time last year, USDA data show. The European Union granted export licenses for 2.63 million tons of soft wheat in the six weeks through Nov. 13 to all destinations outside the bloc, 35 percent more than the year-earlier period.

Wheat production in the EU may drop to 131.8 million tons this season, a five-year low, as southern and eastern countries experienced dry weather, USDA data show. The agency estimates that the bloc’s inventories may slide to 9.2 million tons before next year’s harvest, the lowest on records since 1999.

“We’re bullish the Paris versus Chicago price spread, which is reflective of tight supplies in Europe,” Erin FitzPatrick, an analyst at Rabobank International, said in an interview in Geneva. “U.S. wheat exports are going to increase later in the marketing year.”

Russia, Ukraine

Russia and Ukraine have “closed the door” on wheat shipments after drought cut crops in both countries, Venus’ Mathari said. Russia’s government forecasts the country may produce about 39.6 million tons of wheat this season, less than the 41.5 million tons harvested in the 2010-11 season, when drought spurred a 10-month ban on exports. Russia has no need to implement trade limits now, President Vladimir Putin has said.

Ukraine’s wheat harvest fell 29 percent from a year earlier to 16.4 million tons as of November, official statistics showed Nov. 14. The country likely will stop exports by Dec. 1, Volodymyr Klymenko, head of Ukraine’s Grain Association, said in an interview today. GASC vice chairman Nomani Nomani has said Egypt will drop Ukraine from its official list of wheat suppliers next year, Reuters reported.

During the 2010-11 season, when Russia banned exports, Egypt became the number one buyer of U.S. wheat, with shipments totaling 4.021 million tons, according to the USDA. Last year, U.S. shipments dropped to 949,800 tons, making Egypt the sixth-largest buyer.

About 60 percent of Egypt’s wheat imports are managed by the government and the rest is supplied by the private sector, Mathari said. The country’s grain import program is unlikely to change, even after political unrest toppled former President Hosni Mubarak’s regime last year, he said.

“The food supply for the population is a very strategic and very important sector,” Mathari said. “No matter what the direction is that the regime in Egypt will take, it will always be the top priority. They cannot afford to let the population starve.”

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