Egypt’s return to the wheat market came as traders remained wary of offering supplies to the world’s biggest importer.
The country’s state grain buyer bought one 60,000-metric-tonne cargo of Romanian wheat on Friday, after cancelling two tenders last week following a standoff with international traders over how much fungus is allowed in shipments. It was the government’s first international purchase since January 21 and the smallest since August.
Offers in Friday’s tender were fewer than usual and at a hefty premium to the port-loading price, highlighting the risks of offering grain after a French cargo was rejected over the level of ergot. After conflicting reports about how much of the naturally occurring fungus was allowed, traders last week refrained from offering or charged higher prices. Egypt spends billions on wheat every year to provide subsidised bread for its 88mn people.
“Egypt may be trying to clear the air and provide certainty back to the market, so that when they open the next tender, people are going to be prepared to put forward better prices,” said Hamish Smith, an economist at Capital Economics Ltd in London. “They still need to import wheat, and they haven’t been doing themselves any favours.”
The General Authority for Supply Commodities, which usually buys more than one cargo, said it paid $190.88 a ton in the tender. GASC received just five offers, compared with the usual 10 to 20. Egypt’s price was more expensive than the $179.21 a tonne Tunisia paid for 75,000 tonnes of wheat in a tender earlier this week. Algeria paid about $178-$180 a tonne in its latest tender last week, according to traders.
The Egypt-bound wheat, for March shipment, will come from Ameropa, according to two traders familiar with the process, who asked not to be identified because they’re not allowed to speak to the media.
While Ameropa’s offer was the lowest when adding freight costs, Cargill Inc submitted the cheapest price excluding freight. That offer to supply French wheat was $11.29 a tonne more expensive than grain for loading at the port of Rouen, the second-biggest premium Egypt has been asked to pay since the season started in July.
Confusion started after authorities rejected a cargo from Bunge Ltd, saying ergot levels were too high. Then last month, the agriculture ministry said it would have zero-tolerance for ergot in future, sending shockwaves through world markets as exporters complained it was impractical to stop the fungus entirely. Even after a ministry U-turn last week, returning Egypt to the global standard of accepting 0.05% ergot in shipments, traders remained wary.
Egypt’s rejection of the Bunge’s cargo prompted the White Plains-based company, one of the world’s largest crop traders, to start legal proceedings. Amira, the vessel chartered by Bunge, is still anchored outside the Egyptian port of Damietta, according to ship-tracking data on Bloomberg.
Egypt “may have bought a boat to reassure the market,” said Antoine Liagre, an analyst at Offre & Demande Agricole, referring to Friday’s tender. The high price reflects the fact that the ergot level still hasn’t been clearly fixed, and because the dispute over the rejected cargo hasn’t been resolved, he said.