Gasc accelerated its purchases of wheat in the face of higher prices of both the grain and of shipping, a sector where costs of some vessels have hit their highest in nine years.
Gasc, grain authority for Egypt, the world’s top wheat importer, bought 300,000 tonnes of the grain on Tuesday, its biggest purchase at tender in five months.
The order – comprising one Russian cargo, and two each from Romania and Ukraine - cost an average of $219.34 a tonne, up $3.80 a tonne from a purchase six days ago.
That contrasts with a weakening trend on international futures markets.
Chicago futures, the world benchmark, have lost 3.6% over that timescale while the spot September Paris contract has shed 1.3%.
However, wheat values in the price-leading Black Sea countries which represent Gasc’s key markets, particularly early in the season when supplies have been boosted by harvest, have faced upward pressure – a trend amplified by soaring shipping markets.
Of nine merchants offering cargos both to Tuesday’s tender and last Wednesday’s event, all but one raised the price of their wheat offers.
CHS, for instance, tendered 60,000 tonnes of Romania wheat at $206.38 a tonne this time, compared up $3.50 a tonne on its offer last week, while Glencore raised the price of its Russian wheat by $3.00 a tonne to $206.86.
The exception was Solaris, which cut by $1.30 a tonne to $202.72 a tonne its price for Russian wheat.
The increases come against a backdrop of decreasing estimates for Black Sea harvests – the US Department of Agriculture, for instance, downgraded both Russian and Ukrainian crops in its key Wasde briefing earlier this month.
Some recovery in the rouble since May, encouraged by a revival in oil prices, has also undermined the competitiveness of Russian shipments.
Indeed, Moscow-based SovEcon earlier this week reported export prices for Russian wheat with 12.5% protein up $2.50 a tonne last week to $195 a tonne, excluding freight.
(Gasc, thanks to factors such as a tough and somewhat unpredictable phytosanitary regime surrounding Egyptian wheat imports, tends to pay some premium for its supplies.)
SovEcon, noting that Gasc had only bought 60,000 tonnes of wheat at last week’s tender, also in its briefing earlier this week raised doubts over the wisdom of a slow pace of purchases.
“It looks like that Gasc and other importers still hope to get lower prices for the Black Sea wheat and expect to see a bumper crop in the region,” the analysis group said.
“However, with significantly worsened weather conditions and strong rouble this might not happen.”
Meanwhile, freight rates have staged a strong rally this year, attributed largely to strong demand for capacity to ship iron ore from Brazil to China.
The benchmark Baltic Dry index on Monday reached 2,191, its strongest since late 2013, and taking gains for 2019 to 72%.
The Baltic Exchange’s index for panamax vessels, as would carry 60,000-tonne wheat cargos, reached 2,201, its highest since late 2010.