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Russia, helped by rouble retreat, tightens grip on Egyptian wheat orders

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Russia extended into a third month its clean sweep in orders from top wheat buyer Gasc, amid a retreat in offer prices, undermined by weakness in the rouble, and “increased competition” on international markets.

 

Gasc, the grain authority for Egypt, the world’s top wheat-importing country, bought 120,000 tonnes of wheat, taking to 3.79m tonnes its purchases at tender for delivery in 2017-18.

 

Of these, 2.42m tonnes have been bought from Russia, which was the origin for all of Wednesday’s purchase, comprising one cargo purchased from Archer Daniels Midland and one from Union.

 

Indeed, Russian wheat has accounted for all Gasc purchases since August, when Ukrainian grain also won some custom.

 

Russia’s dominance reflects the low prices of the country’s wheat, which has a reputation as a competitive origin, a stance enhanced this year by the huge supplies available for export following a record harvest of more than 80m tonnes.

 

Lowest since August

 

At Wednesday’s tender, the winning offers of Russian wheat, at $196.50 a tonne excluding freight, were priced $7.50 a tonne below the most competitive cargo offered from Romania, the only other origin represented.

 

The price of the winning cargos was also more than $2 a tonne below the average Gasc paid for Russian wheat at its previous tender, three weeks ago.

 

Indeed, all merchants represented at both tenders reduced their prices for Wednesday’s event, in particular ADM, which cut its offer by nearly $5 a tonne from last time.

 

Shipping charges, at $13.50 a tonne, also fell, a reflection of a pullback in the broader market, with the benchmark Baltic Dry index at 1,477, down 7.0% from a late-October high.

 

The overall price of $210.00 a tonne that Gasc paid for its wheat, including shipping, was the lowest since August.

 

‘Increased competition’

 

Earlier this week, analysis groups Ikar and SovEcon reported some decline in Russian wheat prices, a reflection in part in weakness in the rouble, which boosts the competitiveness of the country’s exports.

 

The rouble on Wednesday touched 59.58 to $1, its weakest in nearly three months, and down 5% from a high reached in early September, falling despite the renewed strength in the price of oil, a big earner for Russia.

 

SovEcon flagged that the wheat price fall had also come “amid increased competition with other suppliers”, in the face of record world stocks of the grain.

 

Merchants also cut the price of Romanian wheat offered at Wednesday’s event, with Cofco’s offer, at $205.48 a tonne, down some $3.50 a tonne from last time.

 

Russia’s export pace

 

The Egyptian order, for delivery in the last two weeks of next month, enhances the prospect of Russia being able to extend its strong performance in wheat exports.

 

Customs data on Wednesday showed Russian wheat exports for the January-to-September period at 20.93m tonnes, a rise of 17.8% year on year.

 

The data imply shipments of 9.54m tonnes for the first three months of the 2017-18 marketing year, which began in July, meaning a slower pace of growth, of 12.8% year on year.

 

 

Gasc bought:

60,000 tonnes of wheat from ADM at $196.50 a tonne, plus $13.50 a tonne freight

60,000 tonnes from Union at $196.50 a tonne, plus $13.50 a tonne freight

 

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