Egypt Wheat Tender Shows Risks as Traders Charge Hefty Premium

February 12, 2016 12:31 AM
 
wheat

Traders willing to sell wheat to Egypt are still charging the world’s largest importer a hefty premium, highlighting the risks of offering grain after a French cargo was rejected.

Cargill Inc. made the lowest offer in a tender Friday, excluding freight costs, according to two traders familiar with the process, who asked not to be identified because they’re not allowed to speak to the media. Still, the price to supply French wheat was $11.29 a metric ton more expensive than grain for loading at the port of Rouen. That’s the second-biggest premium Egypt has been asked to pay since the season started in July.

Egypt, which provides subsidized bread for its 88 million people, failed to buy wheat twice last week as traders refrained from offering or charged higher prices amid confusion over how much fungus is allowed in shipments. The nation stumbled into a standoff with traders after refusing a French grain cargo supplied by Bunge Ltd. over the level of ergot, a naturally occurring fungus.

"There’s still a risk with the ergot story," Pierre Tronc, a broker at Aurel BGC, said by phone from Paris, before a list of offers to the tender was published.

Price Slump

Milling wheat traded in Paris is near a five-year low on concern the dispute with Egypt would result in less demand for Europe’s big harvest. Futures for March delivery were unchanged at 153.25 euros ($173) a ton by 2:29 p.m. on Euronext in Paris, reversing earlier gains of as much as 0.5 percent.

Cargill offered to sell French grain at $185.25 a ton in the tender that called for shipment from March 10 to 20. French wheat with a minimum 11 percent protein content for loading at the port of Rouen was at $173.96 a ton Thursday, according to data from crops office FranceAgriMer.

When adding freight costs, the lowest offer in the tender was from Ameropa AG, which was willing to supply wheat from Romania at $190.88 a ton, the traders said. Cargill’s offer comes to $194.23 a ton when adding transportation costs. Soufflet also offered to supply French wheat, while Al Wehda and Aston offered Russian grain.

"Russia and Romania don’t have the same ergot issue as France," Tronc said.

Five traders offered to supply Egypt in Friday’s tender, down from the usual 10 or 20. The reduced number of offers "show that the ergot risk is still being priced," Swithun Still, a director at Solaris Commodities, a trader of Russian grain in Morges, Switzerland, said in a Twitter post.

Egypt’s rejection of the Bunge 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.

In other agriculture markets:

  • Wheat for March delivery gained 0.6 percent to $4.6075 a bushel in Chicago. Corn for the same month lost 0.1 percent to $3.60 a bushel.
  • Soybeans for March fell 0.2 percent to $8.72 a bushel. Soybean meal for the same month dropped 0.3 percent to $262.90 per 2,000 pounds.
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