Egypt’s Gasc, attempting to fill a void in wheat imports left by a fungal future, made its biggest purchase in nearly three years, at a tender which underlined a recovery in both prices of the grain and in shipping costs.
Gasc, grain authority for the world’s top wheat-growing country, purchased 420,000 tonnes of wheat – its biggest such order since the 535,000 tonnes bought at a tender in early January 2014.
The purchase, of Romanian and Russian wheat, took to 780,000 tonnes the volume of wheat that Gasc has bought since Egypt in mid-September ditched a zero tolerance policy on cargo contamination with the ergot fungus, which can cause hallucinations if ingested in sufficient quantities.
The policy had seen the country in effect blackballed by global grain merchants, given the difficulty of guaranteeing ergot-free cargos, with importing nations – as Egypt now does – typically allowing contamination of up to 0.05%.
‘Playing catch up’
Gasc has now bought 2.04m tonnes of wheat at tender so far in 2016-17, which started in July, closing the gap with the 2.36m tonnes purchased in 2015-16 as of the end of October last year.
“We think Egypt is playing catch up after cancelling/passing on multiple cargoes in September and late August,” said Terry Reilly at Chicago broker Futures International.
And it was able to make its large purchase by being offered 11 cargos, the most in two months, before the ergot furore gained momentum.
However, details of the tender showed that Gasc was paying a higher price for its wheat, at an average of $183.58 a tonne, excluding freight, for its Russian supplies, up 2.2% from that paid in the previous tender, five days before.
Earlier this week, Moscow-based consultancies Ikar and SovEcon flagged upward pressure on Russian prices from renewed interest from Egypt – whose hiatus in orders amid the ergot fuss has been blamed for a 4% drop in the country’s grain exports so far in 2016-17.The result “means an increase of around $4 a tonne compared to last week’s tender, confirming the bullish tendency on the international market”, said Paris-based Agritel.
Russian wheat prices are also being supported by intervention buying – albeit largely of lower quality grain, with 10% protein – which started on September 19.
“In the last few weeks, this government intervention fund has bought around 500,000 tonnes of wheat,” including 50,000 tonnes on Tuesday, said Agritel.
Reviving freight rates
However, the Gasc tender data also signalled some upward pressure on freight rates too, with the authority paying up to $10.30 a tonne for shipping the Russian wheat to Egypt, the most it has paid on this route in a little over a year.
Early in 2016, rates from Russia fell as low as $5.00 a tonne.
While a recovery in shipping rates overall this year has petered out a little, with the Baltic Dry index down 13% from a high a month ago, the Baltic index for panamax vessels – ie those able to carry the 60,000-tonne cargos Gasc buys – has continued to rise, closing at a 13-month high of 925 points on Tuesday.
The resurgence – which contrasts with continued weakness in the market for large container ships – has been attributed largely to better-than-expected coal trading volumes.
(Source – http://www.agrimoney.com/news/large-egypt-wheat-order-highlights-reviving-grain—and-freight—prices–10069.html)