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Russian early-season wheat export at risk over Egypt

Reuters, 09.06.17


GELENDZHIK, Russia, June 8 (Reuters) - Russian wheat exports are at risk three weeks before the start of the new 2017/18 marketing season due to a dispute over a common fungus in Egypt, its largest market, analysts and industry players said.

An Egyptian court has decided to reinstate a zero tolerance policy on the common grain fungus ergot, lawyers on the case told Reuters on Tuesday, plunging trade with the world's largest wheat importer back into uncertainty.

"It can be considered as another case of pressure on the market, on the Russian exporters. Negotiations should be initiated urgently on intergovernmental level," a trader, who asked not to be named, told reporters on the sidelines of a grain conference.

As one of the biggest exporters of wheat to Egypt, Russia is likely to feel the impact of any restrictions more severely than others. Like other exporters, Russia had several cargos of wheat rejected when the zero tolerance policy was last in place.

"Egypt's zero tolerance on ergot, if approved, would have a negative effect on Russian wheat supplies because we are number one on this market," Dmitry Rylko, the head of IKAR agriculture consultancy, said on the sidelines of the conference.

Egypt last year scrapped a ban on ergot in grain imports after it halted purchase tenders because trading houses refused to participate, saying the ban was an impossible requirement.

The renewed discussion on the issue in Egypt comes as Russia, one of the world's largest wheat exporters, enters the new crop season with all-time high stocks of grain after a record crop in 2016. Prospects for this year's crop are also bright so far.

SovEcon, another Moscow-based agriculture consultancy, said in a note that the previously agreed supplies of 180,000 tonnes of Russian wheat to Egypt's state buyer GASC were at risk in June-July.

"One may expect full suspension of (Russian) supplies to Egypt in case the rule is kept in June-July which would negatively affect the pace of Russian exports and export prices," SovEcon added.

DIFFICULT EXPORT SEASON

Russia exported 23.4 million tonnes of wheat in July-April, of which 5.9 million tonnes were supplied to Egypt.

"It is the key market and we must not lose it. We face a difficult export season because the competition is strong, the supply is high in the market," the trader added.

The issue with Egypt comes shortly after Russia has restored agriculture supplies to Turkey following Ankara's short-lived limits on Russian imports.

President Vladimir Putin lifted restrictions on hiring Turkish workers in Russia and removed some other limits but kept the ban on Turkish tomato imports in place.

Russian agriculture ministry sees no risks for Russian wheat exports from the recent Egypt moves, Deputy Agriculture Minister Dzhambulat Khatuov was quoted as saying by Russian newsagencies on Thursday.

"We have talked about Turkey a lot, expressed concerns and you know how all has ended... The same will be with Egypt. They are our historical partners... We see all the rest as marketing moves only," Khatuov said.

The trade dispute with Turkey is unlikely to repeat in the new season, Arkady Zlochevsky, the head of Russia's Grain Union, a non-government farmers' lobby group, told reporters.

"I don't think that there will be any revival of these limits (on wheat)... We opened our markets, except tomato (imports) for them," Zlochevsky said.

He also added that Russia had enough grain storage capacity in most of the regions despite the record carry-over stocks.

Only Siberian region, which is far from the main wheat export parts of the country, might face this problems because its storage capacity is full, he added.



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