As Russian wheat loses out in Egypt, Turkey could become top destination

Reuters , Saturday 1 Jul 2017

Wheat grains
File Photo: Grains of wheat (Photo: Reuters)

Turkey could emerge as the top export destination for Russian wheat in the 2017/18 marketing year, which starts on July 1, overtaking Egypt where Russia appears to be losing ground to rivals such as Ukraine and Romania, traders and suppliers said.

The resolution of a trade dispute with Turkey last month has led to a step up in wheat sales from Russia. At the same time, Russia is losing lucrative business to Egypt, the world's biggest wheat importer, to cheaper rivals.

Turkey is widely expected to increase its wheat imports this year despite an expected large harvest.

"The huge Turkish flour exports are likely to continue in the new year, generating more wheat imports, with Turkey continuing as a major flour supplier in problem regions including Syria, Iraq and Sudan," a European trader said.

Igor Pavensky, the head of marketing at rail operator Rusagrotrans, said competition for the Egyptian market would be stronger in the new season, and Turkey might become the largest market for Russian wheat in 2017/18.

Russia was undercut by Ukraine and Romania at the most recent Egyptian tender on June 22, when its exporters felt compelled to add price premiums to cover a series of possible risks.

These included risks related to a delayed start of wheat harvesting and the latest volatility of the rouble currency, as well as Russia's new rules on strict value added tax (VAT) accounting for the agriculture sector, Pavensky said.

Another major concern is the possible return in Egypt of a dispute over wheat fungus ergot. Egypt's wheat imports were almost brought to a stop last year when the country imposed a ban on wheat imports with any ergot content, generating losses for traders as Egypt repeatedly rejected shiploads of wheat.

An Egyptian court in June made a ruling against the government's current food inspection system, raising fears of a new crackdown on the fungus.

"I think it is impossible to take into account the risk of the ergot problem in the price because in the case of restoration of the zero ergot (policy) there will not be any offers in the tender at all," Pavensky said.

Prices for Russian wheat need to fall by $3-5 per tonne before the origin becomes competitive again, he added.

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