Egypt Will Not Import Russian Grain


June 21 (Bloomberg) — Egypt, the world’s biggest wheat buyer, said it will exclude Russian grain from its tenders for now, a sign the exporter is failing to win back some customers after imposing a 10-month ban on shipments.

Russia, once the second-largest wheat exporter, plans to resume shipments from July 1 after the government predicted total grain output may rise as much as 48 percent this year. While the country has 4 million metric tons of last year’s wheat crop available for export, as much as 2 million tons of it may not be of a good enough quality to ship, according to the Grain Union, the largest lobby group for cereal exporters.

“Last year the Russians failed to ship some quantities that were agreed upon even before the ban came into effect, and that is why I am wary of the Russian side,” Nomani Nomani, vice chairman of Egypt’s state wheat buyer, the General Authority for Supply Commodities, said by phone yesterday. “When we are sure that the Russian side is stable, we will re-include it.”

Wheat traded in Chicago, a global benchmark, rose as much as 89 percent in the past 12 months as drought and flooding from Canada to Russia to Europe ruined crops. Russia’s return to the export markets comes as weather threatens crops again in the U.S. and across Europe, where some farmers are contending with the driest growing season in more than three decades. The U.K., the European Union’s third-biggest wheat producer, declared droughts in some grain-growing regions on June 10.

Egypt’s Terms

Egypt said it would only accept U.S. or French wheat in a tender earlier this month that resulted in GASC buying 120,000 tons from Cargill Inc. and Granite. It was the first tender since Feb. 23. Russia accounted for more than half of Egypt’s wheat imports before its export ban started Aug. 15.

“I don’t think the results of the first Egyptian tenders are a big problem,” said Vadim Vikulov, chairman of Russia’s National Association of Agricultural Products’ Exporters. “There are still big buyers out there. And some countries will be more flexible.”

Russia could increase sales to the EU, Jordan, Saudi Arabia and western Africa, he said. Feed-quality grain will go to Bangladesh, according to Vikulov, who is also chief executive officer of OAO Aston, a food producer and grain exporter based in Rostov-on-Don, Russia.

Quality Concern

Algeria, Africa’s second-largest wheat importer, excluded Russia grain from a tender earlier this month because of concern about quality, Noureddine Kehal, the director general of the Office Algerien Interprofessionnel des Cereales, said June 1. The country bought 350,000 tons of wheat, CME Group Inc. said in a report on its website June 15.

Egypt will wait until Russia starts harvesting its crop in August before deciding on whether to restore the country to its list of approved suppliers, Nomani said. That decision will be based on the size of the crop, the prices and any move to impose export duties, he said.

Russia will prevent a surge in domestic prices when the ban is lifted, First Deputy Prime Minister Viktor Zubkov said on television May 25. Should inflation accelerate, the government will “take measures of customs and tariff regulation,” he told Prime Minister Vladimir Putin three days later. Russia may export 15 million tons of grain, Zubkov estimated. On June 17, Zubkov said on state-run Rossiya-24 television that Russia needs traditional buyers of its grain to believe the country is re- entering the export market “seriously and for a long time.”

The government is unlikely to impose any export duties until at least September, once the size of the harvest is known, according to Oleg Sukhanov, a grain analyst at the Institute for Agricultural Market Studies in Moscow.

Egypt’s Imports

Russia failed to deliver 690,000 tons of wheat to Egypt last year because of the ban, Nomani said. The northern African nation will import 10.4 million tons in the trade year that ends this month and another 9.5 million tons in the next 12 months, the U.S. Department of Agriculture estimates. Algeria’s purchases will drop to 5.3 million tons, from 5.6 million tons, the estimates show.

Wheat prices dropped 24 percent from this year’s high in February on speculation that global supplies will be ample as Russia resumes exports.

“Wheat is all about Russia,” said Alex Bos, an analyst at Macquarie Group Ltd. in London. “If Russia is able to export supply, things will be fine. If not, we will face tightening supplies.”

–With assistance from Tony C. Dreibus in London and Ilya Khrennikov in St.Petersburg. Editors: Claudia Carpenter, John Deane

Source:  Bloomberg

Posted by Haylie Shipp


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