Thriving Russia wheat traders win third Egypt sale

Russia reasserted its dominance at Egyptian wheat tenders, winning its third clean sweep in a row, despite some improvement in offers for French grain – in a deal which implied ever fatter profits for merchants.

Egypt, the world’s top wheat buyer, revealed that, at its third tender this month, it had bought 120,000 tonnes of the grain from Russia.

The order took to 480,000 tonnes Egypt’s total wheat purchases, through tender, from Russia since Moscow from the start of July lifted an 11-month ban on grain exports.

Indeed, the result was "not a surprise", given the competitiveness of Russian prices, and Egypt’s decision to abandon a "wait and see approach" to resuming purchases from the country, Rabobank analyst Erin FitzPatrick said.

Bigger profits

However, the result revealed some erosion in Russia’s competitive advantage, with the winning offers priced at an average of just under $250 a tonne excluding freight, and up $3.45 a tonne from the price Egypt’s state grain buyer, Gasc, paid two weeks ago.

The rise helped reduce to $29 a tonne, from $38 a tonne, the discount of Russian wheat to the cheapest offer for French grain. US soft red winter wheat held its premium.

It also implied even larger margins for merchants selling Russian wheat, which on the domestic market has extended a price fall, weighed down by the impact of harvest in boosting supplies, and by improved confidence over the size of production.

The price of North Caucasus milling wheat fell to 5,550 roubles ($202) a tonne on Monday, according to analysis group SovEcon, down 18% from a mid-June when hopes for a surge in exports lifted grain prices across the board.

Russia vs Ukraine

Russian wheat prices have, even on export markets, traded at an unusual discount to supplies from Ukraine too, attributed to an anomaly stemming from the European Union’s decision to extend until January a period of zero tariffs on a specified quota of imports.

The decision prompted a rash of applications for import licences, which must be used by the end of the second month following their issue.

"Consequently just over 2m tonnes of Russian and Ukrainian wheat will be arriving in the EU by the end of September," the UK grain arm of a major European commodities house said in a report.

However, it appears that the lion’s share of the grain went to Ukrainian shippers, resulting a situation where "inferior quality Ukrainian wheat is trading at a premium to Russian".

"Clearly much of the tonnage was Ukrainian and now the shippers are falling over themselves to obtain the Ukrainian wheat and get it shipped to the EU before the deadline at the end of September. inferior quality Ukrainian wheat is trading at a premium to Russian," the briefing said.

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