PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 17:43 UK, 2nd May 2014, by Agrimoney.com
Egypt buys Ukraine wheat, despite growing unrest

The world's top wheat importer put in a late-season order for Ukrainian supplies of the grain even as tensions in the country escalated with a military offensive against pro-Russian separatists.

Egypt's Gasc grain authority, at tender, purchased 55,000 tonnes of Ukrainian wheat, as well as 55,000 tonnes of Russian supplies.

The purchases came despite the mounting death toll in Ukraine as Kiev launched a military offensive against pro-Russian separatists in the city of Slavyansk - angering Moscow, which has demanded an emergency meeting of the UN Security Council.

Two Ukrainian government helicopters have been reported as shot down, and several people killed, in the move against Slavyansk, where pro-Russian militia have taken hostages.

Thin offers

However, Gasc received offers for only 350,000 tonnes of wheat, half the amount it typically gets to choose from at tender, and with Black Sea supplies priced significantly cheaper than those from France and the US.

Gasc wheat purchases May 2

Russia: 55,000 tonnes bought from Glencore at $292.40 a tonne, plus freight of $11.70 a tonne

Ukraine: 55,000 tonnes bought from Venus at $285.87 a tonne, plus freight of $15.15 a tonne

Even excluding the extra shipping costs compared with getting wheat to Egypt from the Black Sea, the cheapest French wheat was offered at a premium of nearly $15 a tonne to the winning Ukraine tender.

An offer from Bunge of US wheat, at $301.74 a tonne, represented a premium of nearly $16 a tonne.

The competitiveness of Black Sea offers has been improved by the weakness of local currencies, making exports cheaper in dollar terms, with Agritel also noting on Friday that Ukraine farmers are "strapped for cash" to pay for spring sowing programmes.

'Does not need the business'

At INTL FCStone's Dublin office, Jaime Nolan Miralles said that Gasc's willingness to buy from Ukraine, despite the mounting unrest, reflected the country's ability to maintain trade.

"Up to now, exports have not been impacted," he told Agrimoney.com.

As of April 25, Ukraine grain shipments for 2013-14, starting on July 1, had reached 29.13m tonnes, up 2.3m tonnes over the previous month, according to farm ministry data.

Furthermore, France "does not need the business", with the country's shipments, and those of Germany, proving surprisingly strong this season.

Upgrade ahead?

Indeed, the European Union, of which France has accounted for 32% of export volumes this season, has shipped 25.1m tonnes of soft wheat so far this season, including 448,000 tonnes of licences unveiled this week.

"With eight weeks' remaining in the current campaign, Europe needs to push an average of 303,000 tonnes of wheat out the door each week" to meet the US Department of Agriculture estimate for 29m tonnes of shipments of all wheat types this season, he said.

Given the growing discount of Paris futures to their Chicago peers, "one might expect" the estimate for EU exports "to be raised an additional 1m tonnes", Mr Nolan said.

"But we should also not overlook the 2m-2.5m tonnes of exportable surplus in wheat still sitting in the Ukraine and Russia."

Gasc's order, due for delivery in the first 10 days of June, takes nearly to 1m tonnes the volume of wheat it has ordered from Ukraine in 2013-14, while taking purchases from Russia at tender to 1.60m tonnes.

The authority has bought more than 5m tonnes overall this season, at a cost approaching $1.5m, including shipping.

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