Black Sea Wins Egypt Wheat Tender Among French Crop Worries

July 13, 2016 11:08 AM
Black Sea Wins Egypt Wheat Tender Among French Crop Worries

Egypt bought 180,000 tons of wheat from the Black Sea region in this season’s first tender as traders refrained from offering French grain amid concern about this year’s crop quality.

The world’s largest grain buyer purchased 120,000 metric tons from Russia and 60,000 tons from Ukraine, according to the state-run General Authority for Supply Commodities, or GASC. No French wheat was offered. The nation got offers from 13 companies, more than double from earlier this year, when uncertainty over the quality accepted led traders to pull out from Egyptian tenders.

Wheat from nations near the Black Sea is cheaper than other suppliers as France, the major competitor, faces concerns over quality and crop yields after heavy flooding earlier this year. French farmers will harvest 37 million tons of soft wheat this year, a decline of 10 percent from a year earlier, the Agriculture Ministry said in a report on Tuesday.

Fungus Confusion

Quality has been a central issue for Egypt’s wheat market this year after the nation rejected several cargoes for containing ergot, a naturally occurring fungus that can be toxic in high amounts, which led to months of confusion over how much fungus is allowed. Earlier this month, the quarantine office said it will accept the international standards for ergot.

"Let’s see if they take the wheat they bought after the confusion regarding the ergot allowance," said Michael McDougall, a director at Societe Generale SA in New York. "French offers were a lot higher than Russian because of the quality concerns."

Egypt bought 60,000 tons of Russian grain from Louis Dreyfus at $173.42 a ton including freight and 60,000 tons from Aston at $173.48 a ton, according to traders familiar with the matter. GASC also purchased another 60,000 tons of Ukrainian grain from Louis Dreyfus at $172.19 a ton.

France is usually one of the main suppliers of wheat to Egypt, but this year, the crops are in the worst shape in five years after flooding. The fields are at a higher risk of fungal diseases including fusarium, which can hurt yields or produce chemicals known as mycotoxins that can be poisonous for humans or livestock.

Fifty-nine percent of French crops received good or very good ratings as of July 4, the least since 2011, according to a report from FranceAgriMer.

Russian wheat prices are the lowest since 2009 as the start of harvesting showed yields were higher than expected. Wheat for loading at Black Sea ports was $165 a metric ton as of Friday, according to the Institute for Agricultural Market Studies in Moscow.

By comparison, French wheat with a minimum 11 percent protein content for loading at the port of Rouen was $174.45 a ton at the end of last week, according to FranceAgriMer data.

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