Cairo - The US will get a chance to compete with Russia to sell wheat to Egypt when the world’s biggest buyer announces requirements. The outlook isn’t so promising for France.
Egypt’s state buyer is seeking wheat for delivery in the period from June 15 to 24. Supplies from Russia and the US are currently the most competitive, according to broker BGC Partners. French wheat is at a disadvantage because Egypt is seeking higher protein wheat and the stronger euro makes the grain more expensive.
"Whether the US can sell will very much depend on freight," said Pierre Tronc, a broker at BGC Partners in Geneva.
"The euro-dollar is not a good thing for French wheat, so I don’t think France would have been competitive anyway, even if the protein rules hadn’t changed".
Russia has dominated Egyptian tenders this year, having sold almost 70% of all of the purchases by the General Authority for Supply Commodities, or GASC. But the US is becoming more competitive as wheat prices decline, with benchmark futures in Chicago dropping about 10% since mid-February.
One example of business coming back: American exporters recently sent their first shipment to Egypt in almost four months, according to inspection data from the US Department of Agriculture.
Egypt’s GASC is seeking wheat with 12.5% protein content, 0.5 percentage point higher than previous tenders, according to two traders familiar with the matter.
It’s not clear why the standards were changed, but Egypt has gone back and forth on other tender terms over the past year. Higher standards may also mean Egypt will need to pay more for wheat.
Rain wrecked harvest
Russian wheat with 12.5% protein for loading at the port of Novorossiysk was at $183 a ton on Friday, according to the Institute for Agricultural Market Studies, or IKAR.
US hard red winter wheat for loading in the Gulf, which also meets the new protein standards, trades at $201.52 a ton, researcher AgResource said in a report on Tuesday.
"If the new rules with higher protein content remain going forward, it could be a major concern for French wheat," Tronc said.
French wheat is also less appealing as the euro trades at a six-month high against the dollar. The country is usually a major European exporter, but shipments collapsed this season after heavy rain wrecked the harvest, leading to the lowest yields in three decades.