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Traders see quick return of Ukraine wheat to Egypt

State buying agency says it is considering re-adding Russian and Ukrainian wheat to the origins permitted in purchase tenders

Reuters, Wednesday 20 Jul 2011
wheat (Photo: Reuters)

Egyptian state wheat buying agency GASC may allow Ukrainian wheat in its giant purchase tenders by the end of this month, traders said on Wednesday.

"There are indications from GASC that a change is imminent, and there is a growing feeling in the market that Ukrainian wheat will be permitted in the next GASC tender," one trader said.

GASC said last week it was considering adding Ukrainian and Russian wheat to the origins permitted in its purchase tenders, which are among the most competitive in the global grains market.

Egypt, the world's largest wheat importer, removed Ukraine from the origins permitted in its purchase tenders in late 2008 following a series of disputes about quality.

GASC on 6 July permitted Russian wheat to be offered after a gap of almost a year following Russia's export ban last summer.

"The extra competition from Russia allowed Egypt to save almost $4 million week against previous purchases before Russia was permitted," one trader said. "People believe GASC will introduce Ukrainian wheat quickly to put further downward pressure on prices, regardless of whether it is actually bought."

A new tender from GASC is expected in coming days. GASC could not be reached for comment as officials were travelling in Russia for talks with grain suppliers.

"There are still several quality inspection issues still to be resolved with Ukraine," another trader said. "Signals are that GASC requirements for Ukrainian wheat will be the same as Russian, or a minimum 11.5 per cent protein content and free of (the fungus) ambrosia."

"I think Ukrainian wheat will not have difficulties in reaching this quality level this season."

Ukraine joined Russia in restricting grain exports last summer after a poor crop. But better harvests this year mean Ukrainian export prices are low. Ukrainian wheat beat Russian in a fiercely contended purchase tender from Lebanon in early June.

"The remaining inspection issues may mean Ukrainian wheat will not be bought at once even if it is included in the next tenders," a trader added. "But the extra competition would be bad news for U.S. and French wheat in coming months."

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