Why US wheat exports to Egypt will stay rare

The Egyptian government's first purchase of US wheat in more than two years was a stopgap measure to ensure it had enough supplies until offerings from its favoured sources in the Black Sea region were more readily available, traders said.

GASC, the Egyptian government's purchasing agency, signed a deal on Wednesday for its first purchase of US supplies since February 2015. The size of the deal eclipsed the total of privately-negotiated US wheat shipments to Egypt for all of the 2016-17 crop year. Still, it represents less than one per cent of expected 2017-18 imports for the world's top buyer of the grain.

Egypt bought 115,000 tonnes of US wheat for the 2017-18 crop year at prices ranging from $207.25 to $207.90 a tonne, including freight, in the most recent deal. GASC also bought another 180,000 tonnes of wheat, divided equally between Ukrainian, Russian and Romanian supplies.

One Cairo-based trader said US wheat would be competitive in GASC tenders for now because of freight prices being cheap and low US FOB prices as hard red winter wheat is abundant. "The Russian wheat is priced a little bit expensively and... the US has lots of stocks," the trader said.

Total wheat shipments to Egypt are expected to grow to 12 million tonnes in the 2017-18 crop year, 500,000 tonnes more than the 2016-17 marketing year that ends on May 31. US shipments, all of which were negotiated in private deals not involving Egypt's government, have accounted for just 60,269 tonnes of the 2016-17 total, according to US Agriculture Department data.

Turning back to Russia

Egypt's renewed interest in US wheat could dry up quickly once supplies from the Russian harvest begin arriving at export ports this summer.

Prices for Russian supplies delivered in June and July are about $15 to $20 per tonne below US offerings, said Frank Stone, president of brokerage Kansas City Trading Group.

Another Egypt trader said US wheat sales to the Egyptian market are likely to remain limited because the private market in Egypt does not buy US hard red winter wheat. Instead, it buys soft wheat, and only for a smaller range of clients for items like pasta. The trader said the quality of hard red winter wheat is too low for the private-sector clients.

Analysts were split on whether prospects for US wheat exports could lend support to futures prices in the coming months.

Some said US wheat was acceptable to the Egyptian government's buyer only because of the recent price drop - K.C. wheat futures have fallen 8.6 per cent from their 2017 peak in early March - and the heavy global balance sheet will likely keep the bearish market tone firmly in place.

Source: Khaleej Times