Egypt, the world's top wheat importer, hailed the growing competitiveness of French supplies as it bought from the European Union's top exporter for the first time since June.
Results of the latest tender by Egypt's state grain buyer, the General Authority for Supply Commodities, showed Argentina retaining its recently-secured place as price leader, even after a rise in its cheapest offer of more than $6 in a week to $226 a tonne.
Gasc bought 60,000 tonnes of Argentine wheat from Louis Dreyfus.
However, it also bought 60,000 tonnes of French wheat, the first such purchase of 2011-12, after a further drop in prices to $240.50 a tonne, down $4 from the cheapest offered in last week's tender.
The drop took French wheat below all offers from Russia, which has dominated Egypt's wheat trade since returning to exports in July following a drought-reduced 2010 harvest.
"I'm glad that French wheat is again competing in the Egyptian market," Nomani Nomani, the Gasc vice-chairman, said.
Russia loses its edge
Indeed, while Gasc also bought 60,000 tonnes of Russian wheat, that winning offer, priced at $243.98 a tonne, relied on the low shipping costs from the Black Sea to Egypt to squeak past other cheap bids from France.
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Egypt wheat order December 13, (+shipping costs)
Russian: $243.98 a tonne, ($14.25 a tonne)
French: $240.50 a tonne, ($20.85 a tonne)
Argentine: $226.00 a tonne, ($37.50 a tonne) |
Merchants' ability to gain further supplies of competitively-priced Russian wheat has been hampered by a dwindling in supplies in areas near to ports, already sapped by the roaring start to 2011-12, and increased competition with domestic users.
Russian domestic prices for fourth-grade wheat, the export benchmark, rose 75 roubles last week to 5,775 a tonne, according to SovEcon.
"The main driver behind the rise is demand from domestic processors, who are building up stocks ahead of lengthy holidays in the end of December and in January, when the market activity will be minimal," the Moscow-based analysis group said.
SovEcon added that "the rise of domestic prices in the last few weeks lowers the competitiveness of Russian grain" at a time when prices of grains from other origins is falling.
Russian stranglehold
Mr Nomani had previously expressed his frustration at the inability of other exporters to compete with Russia, which has scooped the huge majority of Gasc's orders so far in 2011-12, accounting for about 3m tonnes of the 3.8m tonnes the authority has bought.
This dynamic leaves Egypt reliant on a country which tarnished its reputation as a supplier last year by imposing a ban on exports following its drought, and leaving importers such as Egypt without previously-ordered supplies.
However, Tuesday's auction, besides seeing the first order of French wheat for months, also attracted an offer of US soft white wheat, competitively priced at $261 a tonne including freight, but said to be unable to meet tender specifications.
"I don't think Gasc will lose too much sleep about spreading its money a bit wider," a UK grain trader told Agrimoney.com.
The result also looked supportive for markets in confirming the difficulty that Russia, the price leader for so much of 2011-12, was having in cutting its prices further, the trader added.
"It's part of the picture that is questioning how much downside to prices there is, despite ample world supplies."
Paris wheat for March closed 1.0% higher at E177.00 a tonne.
'Timely rainfall'
Also on Tuesday, Argentina shared with Russia the spoils in a 110,000-tonne order of milling wheat from Yemen.
Argentina is lowering prices to clear silos for a newly-started harvest expected to beat early forecasts, with the US Department of Agriculture on Friday hiking its forecast for the crop by 1.5m tonnes to 14.5m tonnes.
"Timely rainfall during the late grain-fill stage reversed earlier persistent dryness and boosted yields for the Argentine wheat crop," USDA analyst Denise McWilliams said.
However, Abares, the Australian crop bureau, on Tuesday pegged the Argentine crop at 13m tonnes, warning that "below average" rainfall had "continued throughout October in Buenos Aires Province, which typically produces more than half of Argentina's crop".
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