Algeria bought a surprisingly high volume of milling wheat on Thursday, accelerating its purchases at a time international tensions have led to a surge in demand from countries such as Iran, European traders said.
Algeria's state grains agency OAIC bought at least 700,000 tonnes, and possibly up to one million tonnes, of optional-origin milling wheat at between $300 and $303 per tonne, cost and freight included, the traders said.
Algeria has not made such big purchase since the 800,000 tonnes it bought in late January 2011, during the Arab Spring.
"Algeria may be aware that countries such as Iran and Syria have big needs, prompting it to boost its purchases," one exporter said.
Iran bought at least 600,000 tonnes of wheat recently. To close its grain purchases, the Islamic Republic is bartering gold and oil and/or paying in foreign currency as it steps up efforts to beat sanctions that had started to choke imports of food staples.
Syria, where revolts have turned into a civil war, has issued a new international tender to purchase 100,000 tonnes of soft milling wheat after failing to purchase grains in its two previous tenders, traders said on Thursday.
"Algeria has more needs. In this context they are right to hurry," another trader said, adding the price paid was competitive because of the volume purchased.
Shipment was for April and May. Algeria, which has needs estimated at around 500,000 tonnes a month, had originally tendered for 100,000 tonnes for shipment in April.
The wheat was likely to come from the European Union, France in particular, after Algiers recently rejected cargoes of South American grain for quality reasons, they said.
"Several shipments from Argentine and Paraguayan have been refused because of pest damage," another exporter said. "This forced Algiers to come back to French origins."
According to Reuters calculation, around 95,000 tonnes of wheat have been loaded in France to Algeria in January, in sales that were initially attributed to South American origins.
In February, data showed that 25,000 tonnes have already been loaded and one trader said two other cargoes of 25,000 tonnes each were set to load this month.
Traders also mentioned fears of a rise in prices on the world market either because of damage due to a cold snap hitting western and eastern Europe but also an ongoing threat of seeing Russia and Ukraine restrict their grain exports.
Similar moves had led to a surge in prices on the world wheat market last season.