Egypt bought wheat from Russia at increased prices

The first tender of the Egyptian state-owned company GASC after the suspension of the grain deal turned out to be successful for the exporters of Russian wheat. Grain from the Russian Federation accounted for five of the six purchased batches of 300 thousand tons, and the accepted prices of $ 250 per ton mean a reduction in the discount relative to competitors. But in the future, Russian wheat may become less profitable than grain from the eastern part of the European Union, where large stocks have been accumulated, analysts emphasize.

The Egyptian state-owned company GASC bought 300 thousand tons of Russian wheat at a tender on August 2 at $250 per ton (FOB) plus a freight cost of $14 from the port of Kavkaz. The delivery time is September 1-10, 2023, two lots of 60 thousand tons were sold by traders Grain Flower and Aston, another lot was sold by Olam. The results of the tender were published by industry analysts, they were also reported by the Union of Grain Exporters.

The only purchased batch of wheat of other origin is Romanian from Viterra at $249 per ton plus $13.05 freight cost. In this case, it is likely that the price was reduced during negotiations. Initially, wheat from Romania was offered by traders for at least $252 per ton. A total of 30 proposals were submitted for the tender, 20 of which were for Russian wheat, the price of which was set by all traders at $250 per ton.

Egypt is the world’s largest wheat importer, and almost all shipments to the country in recent years have gone through GASC. Last season, Egypt increased its purchases of wheat from Russia by 61.1%, to 8.1 million tons, the Union of Grain Exporters reported. This is the second result after Turkey, which purchased 9.2 million tons, 33.8% more than a season earlier.

This is the first GASC tender after the suspension of the grain deal and the attacks on the Danube ports, which jeopardized food supplies from Ukraine, which led to a sharp increase in wheat quotes on world exchanges. Last week, analysts in this regard predicted an increase in average prices for Russian wheat with 12.5 percent protein on an FOB basis to $ 250-260 per ton (see Kommersant of July 24). Last Friday, Sovecon estimated average prices for wheat from the Russian Federation with the nearest delivery at $242-246 per ton (FOB).

Prozerno General Director Vladimir Petrichenko points out that the tender turned out to be very profitable for GASC, since the state-owned company bought wheat at the bottom of the market. For wheat exporters from Russia, the results are also positive, as they mean a reduction in the discount relative to competitors, the analyst points out. Prices for French wheat at the GASC tender started at $270 per ton, one batch of Ukrainian wheat from the Romanian port of Constanta was offered at $269 per ton. The Union of Grain Exporters noted that the tenders of Algeria, Tunisia and Bangladesh have recently ended, the average settlement price for which was $250 per ton (FOB).

Andrey Sizov, director of Sovecon, says that GASC did not have the opportunity to postpone the tender again, although the cost of Russian wheat at $250 per ton might have seemed high to the state-owned company. In the short term, he said, this is good news for exporters. But, Mr. Sizov warns, at a price of $250 per ton in the future, Russian wheat may lose its competitive advantage over European wheat, primarily from the eastern part of the EU, where significant stocks have been accumulated. In addition, the expert says that the lack of competition between wheat traders from the Russian Federation is unlikely to suit GASC, and this is fraught with complications when Egypt accepts shipments of Russian wheat, as has already happened in past years.

Director General of the Institute for Agricultural Market Studies Dmitry Rylko says that the prices at the GASC tender generally fit into the market trends, showing a direction towards moderate growth. The prerequisites for a significant reduction in prices for food wheat on the world market, he said, have become less pronounced in recent weeks. The prospects for the quality of the new wheat crop in the EU have become more difficult due to continuous rains and difficulties with harvesting, and the situation with the quality of the crop in Russia is not the most optimal, says Mr. Rylko. Vladimir Petrichenko notes that there are no new reasons for significant price fluctuations yet.

Anatoly Kostyrev