Egypt Poised to Buy French Wheat as Prices Discounted to RussiaWhitney McFerron
Egypt, the world’s biggest wheat buyer, may import French supplies in a tender today for the first time in 11 months as prices trade at a discount to grain from Russia and eastern Europe.
Spot-market prices for French wheat were about $277 a metric ton yesterday, compared with Russian supplies at $287 a ton and Romanian at $283 a ton, said Mike O’Dea, a risk management consultant at INTL FCStone in Kansas City. Egypt’s state-run buyer the General Authority for Supply Commodities has only bought wheat from Romania, Ukraine and Russia since the 2013-14 marketing year began July 1. GASC said it is seeking at least 60,000 tons in a tender today for shipment Dec. 1-15.
“Russia and Romania have done their job and they have nothing more to sell,” Christelle Tailhardat, a senior trader at Nimes, France-based exporter Granit Negoce, said in an interview yesterday in Geneva. “After that there is French supply and nothing more.”
Milling wheat futures traded at 203.25 euros a ton yesterday on NYSE Liffe in Paris, down 18 percent this year. World production may be a record 696.4 million tons this season, with harvests surging 33 percent from the prior year in a bloc of former Soviet Union countries after crops recovered from dry weather in 2012, International Grains Council data show.
French wheat is becoming more competitive as Romanian supplies run low and Russia contends with quality issues after excess rain during the harvest in September, said Sterling Liddell, a senior vice president at Rabobank International. France is the European Union’s largest wheat grower. Romania, the biggest foreign supplier to GASC tenders this season, ranks fifth in the 28-country bloc, according to an October report from trader Alfred C. Toepfer International.
Egypt last bought French wheat in a tender on Dec. 1, purchasing a 60,000-ton cargo from Bunge Ltd., data compiled by Bloomberg show. GASC buys grain from international and domestic suppliers for a subsidized bread program in the country, where 25 percent of the population lived below the poverty line in 2011, state figures show.
Egypt probably won’t buy U.S. supplies in the tender today because North American grain handlers are focused on shipping recently harvested corn and soybeans, FCStone’s O’Dea said by e-mail. U.S. prices also have been higher than competitors, with the International Grains Council estimating hard, red winter wheat at the Gulf of Mexico at $314 a ton on Nov. 12.
“We are clearly not even close to being able to work into Egypt,” said Kelly Herrick, a merchandising consultant at Advance Trading in Bloomington, Illinois. “U.S. wheat has been primarily headed to Brazil, South American destinations and Mexico. There are just cheaper supplies of wheat available. We have to compete not only against Black Sea wheat, but now French wheat and German wheat has been more competitive.”
French soft wheat production may be 36.96 million tons this year, up 3.8 percent from 2012, while exports may total 18.26 million tons, crops office FranceAgriMer said yesterday. That compares with a Romanian harvest of about 7.65 million tons, according to Toepfer. The U.S. Department of Agriculture estimates Egypt’s wheat imports will be 9.5 million tons, 14 percent higher than the prior year.
“Egypt is going to need more cargoes before too long so that increases the demand for wheat,” Rabobank’s Liddell said in an interview yesterday before the latest tender was announced. “France has the upper hand right now as an exporter.”