Chicago wheat bulls should curtail their celebrations at the
first victory by US supplies in two years at a tender by Egypt's Gasc, despite
the event revealing a sharp discount compared with Black Sea supplies.
Gasc, grain authority for the world's top wheat-importing
country, late on Wednesday revealed the purchase of 295,000 tonnes of the grain
at tender at an average of a little over $208 a tonne, including freight,
equating to an outlay of more than $61m.
The order included 115,000 tonnes of US hard red winter
wheat – Gasc's first purchases from the US at tender since February 2015,
according to Agrimoney.com records.
Indeed, details of the offers to the tender highlighted the competitiveness
of US wheat, which was offered as low as $185.40 a tonne, excluding freight,
equivalent to about $5.05 a bushel.
This far undercut offers from other origins - including from
the likes of Russia and Ukraine which are famed for competitive pricing – so enabling
US wheat to win custom despite the extra costs of shipping from Gulf of Mexico
ports across the Atlantic to Egypt.
Russian export slowdown
Indeed, French wheat was the next most competitive to US,
excluding shipping, offered by merchant Casillo at $196.95 a tonne, but
overlooked by Gasc again thanks to relatively high shipping costs compared with
cargos from the Black Sea.
The cheapest offer of Russian wheat was made by Midgulf at $198
a tonne excluding freight, a reflection of the boost from revived oil prices on
the rouble, whose strength in turn boosts the value, in dollar terms, of domestic
Indeed, Agritel, flagging "the sharp slowdown" of Russian
wheat shipments, said it was now forecasting the country's 2016-17 exports at 26.5m
tonnes - 1.5m tonnes below the estimate by the US Department of Agriculture,
whose data set global benchmarks.
"That could lead to a rise of ending stocks to 13m tonnes, versus
10.6m tonnes seen by the USDA," Agritel said.
'Pricing is about
However, analysts cautioned investors against taking the
extent of the price competitiveness of US wheat as an invitation to inflate
"Nowadays US wheat going to Egypt has generally been as a
sign that US pricing is about right," said Tobin Gorey at Commonwealth Bank of
US-based Benson Quinn Commodities termed the Egyptian order "good
business", which "reflects the competitive nature of the US wheat offer".
But the broker noted that Gasc "also bought cargos from
Russia, Ukraine and Romania, so it doesn't actually indicate that the US has a
The order "certainly doesn't indicate that US values needs
to run away from business" by running higher.
US wheat faces a geographical disadvantage in trade with
many key importing countries, a number of which are in North Africa and the
Middle East, given the extra freight costs.
The region's appetite for wheat imports was underlined by
separate tenders on Wednesday from Tunisia for 92,000 tonnes of soft milling
wheat, while Jordan issued a tender for 100,000 tonnes of hard milling wheat.
Separately, on Thursday Jordan retendered for 100,000 tonnes
of feed barley, for which Saudi Arabia tendered for 1.5m tonnes.
The requests come in the face of declining world barley production,
which will see world inventories of the grain end 2017-18 at a 34-year low, on