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Russian traders trim Egypt premium to win, another, Gasc order, 06.10.17

Wheat merchants appear to be shedding some of their caution over dealing with top importer Egypt, with prices showing a reduction in the premium the country is being forced to pay following its latest cargo furore.

Gasc, the Egyptian grain authority, on Tuesday purchased 180,000 tonnes of Russian wheat, for delivery in November, taking the total it has purchased so far in 2017-18 to 3.27m tonnes.

However, the price that Gasc paid, at an average of a little over $213 a tonne including freight, was up only $2.20 a tonne from its last tender, two weeks ago, when it purchased 175,000 tonnes of Russian wheat.

That increase is far lower than the rise in Russian export prices, which Ikar has reported at $6 a tonne for 12.5% protein wheat, excluding freight, with SovEcon putting the rise at some $14 a tonne.

Premium narrows

The relatively weak rise in Gasc's wheat cost was in part down to a retreat in freight costs, which fell as low as $13 a tonne for one cargo, the lowest the authority has paid on this route since June.

The decrease tallies with a decline in the benchmark Baltic Dry index, which has dropped nearly 12% since hitting a three-year high on Monday last week.

However, it also reflected a drop in the premium which has been, as SovEcon said last week, "requested by sellers for deliveries to Egypt due to recent problems with the acceptance of two cargoes after the detection of poppy seeds in imported wheat".

Egyptian officials have withheld clearance for one cargo of French wheat and one cargo of Romanian wheat over claims of high levels of poppy seeds, raising alarm bells with traders, after Egypt last year rejected wheat thanks to adoption of a zero tolerance policy on ergot.

Ergot is a common fungal contaminant which most importers regulate by allowing some small concentrations in imports, and Egypt's cargo rejections ran up hefty costs for some merchants.

'Big harvest is telling'

When compared with the Ikar and SovEcon price estimates, which put Russian export prices as of last week at $191-194 a tonne, the premium paid by Gasc appears to have roughly halved over the past two weeks.

"It looks like the pressure from the big harvest is telling, with some people being keen just to strike a deal," a European trader told

Worries over Egypt's finances appear to have eased somewhat too, with credit default swaps, in essence insurance against default, easing back on one-year sovereign bonds after a mid-September rise.

The relatively small rise in Russian wheat prices meant that they retained a large discount to offers from France and Romania.

Casillo offered French wheat at $209.90 a tonne excluding freight, up $1 a tonne from the previous tender, with Cofco keeping its offer for a Romanian cargo flat at $204.99 a tonne.

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