Wheat prices closed lower in Chicago despite US victory in the latest wheat tender by Egypt, the top importer, amid disappointment at the small size of the order and questions over the low price.

Egypt's state grain authority, Gasc, after a request late on Friday for tenders bought 60,000 tonnes of soft red winter wheat, the type traded in Chicago, at $306.80 a tonne excluding freight.

The tender was the fourth one running at which Gasc has bought some, or all, of its requirement from the US.

Indeed, the US wheat far undercut French supplies, offered by Glencore at $355.00 a tonne.

'Blurry result'

The result "confirms the competitiveness of US origins, while Europe is penalised by a stronger euro", making its wheat exports less affordable to buyers in other currencies, Agritel, the Paris-based consultancy, said.

However, the low level of the winning bid raised concerns of whether it was representative of the US cash market, given that it was $10-15 a tonne below other offers of US wheat, besides being so cheap compared with French grain on offer.

"Typically, such news would be bullish for markets," said Luke Mathews at Commonwealth Bank of Australia.

"But this result is little blurry because of the weak prices."

Small order

Indeed, Gasc paid a lower price for its US wheat than its last purchase, on January 10, despite a rise of some 3.5% in prices of Chicago futures since then.

Occasionally, tenders do reveal lots priced well out of the market, including another offer of US wheat in August from Alex Grain priced at $310.99 a tonne - $45 a tonne cheaper than other offers of American supplies and, excluding freight, below offers from Russia and Ukraine too.

As a further concern to traders, the size of the order represented one cargo, the minimum Gasc order, and well below 400,000-tonne volumes earlier in the season.

Gasc has said that it has supplies sufficient to last until mid-June, when it will be able to start replenishing silos from the domestic harvest.

'Hardly spoiled for choice'

Mr Mathews forecast that while the Gasc result "will still support the futures market today, the overall impact should be relatively small".

And indeed while wheat at one point rose more than 1% in Chicago, the benchmark March contract fell back to close at $7.63 a bushel, a decline of 0.3% on the day.

The intraday rise in prices was helped by concerns over a dearth of wheat on offer at the Egyptian tender, with Gasc receiving seven offers of wheat, from two countries, France and the US.

"If this is a reflection of what is on offer to international buyers, then they are hardly spoiled for choice," a UK trader said.

"It doesn't look like buyers hold all the cards."

Supply squeeze

Gasc, which for the January 10 tender received 13 bids from three countries, had also invited offers of wheat from countries including Argentina, Australia, Romania, Russia and Ukraine.

Black Sea supplies have been sapped by a strong start to exports for 2012-13, and after a weak harvest, while Australian shipments are losing competitiveness, Cargill's AWB grain handler has warned.

A poor harvest in Argentina has prompted the government to row back from an announcement of a 6m-tonne quota for 2012-13, with shipments limited to 2m tonnes through to this month, and potentially on course for a 24-year low, according to US farm officials in Buenos Aires.

Rain on its way?

But wheat prices also felt downward pressure from disappointing weekly US export data, with cargo inspections coming in at 15.2m bushels, down 32% week on week, and below market expectations.

Furthermore, forecasts for rain on the dry US Plains eased concerns for drought-pressed winter wheat seedlings.

"The GFS weather model is pushing moisture through the Plains this weekend and that has pressured wheat values," Darrell Holaday at Country Futures said.