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
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.
"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.
such news would be bullish for markets," said Luke Mathews at Commonwealth
Bank of Australia.
result is little blurry because of the weak prices."
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.
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.
look like buyers hold all the cards."
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
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
for rain on the dry US Plains eased concerns for drought-pressed winter wheat
"The GFS weather
model is pushing moisture through the Plains this weekend and that has pressured
wheat values," Darrell Holaday at Country Futures said.