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Opinion: Egypt's tiny wheat reversal is a big deal

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The wheat market just crossed a rubicon.

Ever since the grain's last rally petered out two years ago, weakened by a bumper crop and global recession, importers have held all the cards. It is less than two months Chicago wheat slipped below $4.30 a bushel, nearly its lowest for three years, as buyers sat on their hands.

Egypt's relaxtion of import rules only introduced last year shows that the balance of power has shifted a long way back to exporters.

Allowing France to ship in 30,000-tonne volumes rather than the 60,000-tonne panamax standard is a more significant reversal than it first appears.

Why the concession?

After all, it is not as if Cairo had to go easier on France, the European Union's top gain producer, to guarantee access to its exports.

Sure, the panamax-only rule, which Cairo imposed last year, made it trickier for French merchants to compete. Rouen, France's main grain port, can't take such big vessels.

But it was not impossible. France still managed some victories in Egyptian wheat tenders, even under the new rules.

Hotter competition

What Cairo's move does show is that it wants to make life easier for France's merchants.

And that's quite a shift for a buyer which focused, as importers' power grew, very much on getting value for money.

It looks the question mark that drought has placed over Black Sea exports, which had appeared a limitless source of low-cost grain, has instilled in Egypt the realisation that it is going to have to compete that bit harder for its supplies.

Egypt won't be the only buyer knocking on Europe's door, now that supplies from Russia and its neighbours are drying up.

Follow the leader

That's a significant shift.

There have been many � apparently rational - suggestion that wheat prices will fall as fast, or even faster, than they rose this month, as southern hemisphere crops come onstream, the world's huge stockpiles are opened up, and, further ahead, farmers plant extra acres.

But it doesn't look like Egypt is taking any chances with its supplies. And if the world's biggest wheat buyer is hedging its bets, the rest of the market should take note.


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