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IKAR in Mass Media

Egypt buys wheat, at last - but pays premium for ergot furore

16 февраля 2016 года

Egypt, the world's biggest wheat importer, is back in the market for buying, after being snubbed by merchants – but is paying a premium for the uncertainty surrounding controversial impurity specifications.

Egypt's Gasc grain authority, after two failed tenders, on Friday made its first purchase of wheat in more than three weeks.

However, the order was limited to one purchase, of 60,000 tonnes of Romanian wheat, after receiving offers for only five cargos at prices which appeared - while less elevated than values submitted to last Friday's failed tender – still above-market.

"It looks like Egypt just had to hold its nose and buy something. Pulling a third tender would have been a big loss of face," a UK-based trader told Agrimoney.com.

"The premium they are having to pay looks to have come down a little bit from last week, but not much."

Price premium

Gasc paid $186.55 a tonne for its cargo of Romanian wheat, sold by merchant Ameropa, plus $4.33 a tonne for shipping, making a total of $190.88 a tonne.

That is a steep discount to the $193.55 a tonne, excluding freight, that Ameropa offered wheat to Gasc at in the tender a week ago.

However, the price remains expensive on other counts.

Tunisia on Wednesday paid $178.91-179.33 a tonne, including freight, for three cargos of 25,000 tonnes of milling wheat.

French, Russian offers

The other offers that Gasc received too also appeared expensive, with prices above those quoted by market commentators.

The lowest Russian wheat offer was at $191.99 a tonne, excluding freight, where ag consultancy Ikar quoted cash wheat prices in Russian Black Sea ports at just $181 a tonne earlier in the week.

French wheat was offered at $185.25 a tonne, an export price far higher than might be expected given the E144 ($162) a tonne merchants are offering for the grain in the French port of Rouen, according to Paris-based consultancy Agritel.

Ergot furore

The number of offers to Gasc's latest bid, at five cargos, totalling 300,000 tonnes, was well below the 1.2m tonnes it received in a tender before Christmas, the last before Egypt became embroiled in fusses first over credit worthiness, and then over specifications regarding contamination of cargos with ergot.

While Egypt has historically allowed contamination levels in cargos of 0.05% of the fungus, which can cause hallucinations if eaten in sufficient quantities, the rejection of a French cargo two weeks ago was reportedly down to the country's agriculture ministry reportedly adopting a zero tolerance policy.

Bunge, the merchant in charge of the snubbed cargo, is taking legal action over the move.

Cargo rejection carries large cost implications for traders, in terms of shipping, demurrage and potentially hedging costs, and the discount which would likely needed to attract a new buyer for the wheat.

Gasc and Egypt's agriculture ministry last weekend, in an attempt to draw a line under the furore, held a joint press conference at which they restated their commitment to a 0.05% ergot contamination allowance.

However, the lack of written confirmation of this specification has worried merchants.

Source: AgriMoney.com  |  #grain   |  Comments: 0   Views: 125

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