Agro Perspectiva

US wheat undercuts Russian in Egyptian tender

06.08.2010 10:53 "Agro Perspectiva" (Kyiv) — US wheat has, unusually, undercut Russian supplies in an Egyptian tender by a distance, with Cargill offering hard red winter grain $7 a tonne cheaper than some of the winning Russian crop. Russia won a fourth consecutive clean sweep at a wheat tender from Egypt, and will supply all 180,000 tonnes purchased by the world’s top importer of the grain. However, the price Egypt’s General Authority for Supply Commodities grain buyer paid, at an average of $261.49 a tonne, was 9% more than it bought Russian wheat for at the last tender, decided only four days ago. And, on paper, it was only shipping costs that prevented the US making a rare showing in the latest tender. Cargill, the US crop giant, offered hard red winter at $263 a tonne — $7 a tonne cheaper than some of the Russian grain Egypt bought, from Bunge. Shipping costs to Egypt from the US are, at $40 a tonne, twice as high as those from Russia’s Black Sea ports. The competitiveness of US wheat comes amid growing fears that Russia, facing a slump in production because of drought, will restrict grain exports, forcing buyers to the European Union and the US, which are both sitting on rich supplies. America, once a significant supplier of wheat to Egypt, has been edged out in recent years by the competitiveness of Black Sea grain. However, the switch to America may take some time to filter through, analysts have warned, given the relatively strong crop in Russia’s south, a major source of export grain, and buyers’ keenness to tap Black Sea supplies before any curbs are introduced. «Egypt may try to buy as much grain as they can between now and when a ban on exports comes in,» a London analyst told Agrimoney.com. «If Russian wheat is priced equal or less, they are going to buy it.» Russia’s exit would strengthen the grip on the market of exporters which have not proved so competitive. Fears for Russia’s exports were stoked on Wednesday by comments from Arkady Zlochevksy, the president of the Russian Grain Union, that government officials were discussing restrictions. He urged a two-month ban on grain exports in September and October, allowing merchants to renege on delivery contracts, claiming force majeure. Imposing mere export duties, as Russia implemented in 2003–04 and 2007–08, would be insufficient to halt shipments and lead to «mass defaults» of exporters, said Mr Zlochevksy, whose organisation represents both producers and traders, and which is seen as particularly influential, and has office in the farm ministry headquarters. Separately, Commerzbank analysts warned that Russian export curbs «can not be excluded», despite a government denial on Tuesday, noting the risk of higher wheat costs feeding through into mounting inflation. The bank added: «In view of the massive crop failures there might be a strong decline in exports and sporadic delivery failures anyway, even without an officially imposed export stop.»