February 19, 2015

19/02/2015: Wheat futures drop after Egypt bemoans "high US prices"

Wheat futures gave back early gains to post 2 percent losses after Egypt's Gasc grain authority ditched proposals for buy US wheat - citing prices more than 25 percent higher than it has been paying for European supplies, Agrimoney.com reports.

Chicago soft red winter wheat futures for May, which rose 1.5 percent to US$5.39 ¾ a bushel earlier, tumbled to US$5.21 ½ a bushel, down 1.9 percent.

Hard red winter wheat for May, traded in Kansas City, gave up early gains to stand at US$5.50 a bushel, a drop of 2.3 percent.


The declines followed the announcement by Gasc, grain authority for the world's top importing country, that it was not buying any wheat offered in a tender overnight for exclusively US grain, which was offered at prices well above those suggested by the futures market.

The reason for the rejection of the offers was "high prices", a Gasc spokesman said.

The tender, which was seen as a way of utilising a US$100m credit line extended to Egypt by Washington, attracted offers of only four cargoes.

And the cheapest of these, tendered by Cargill, was priced at US$287 a tonne, on an FOB basis, for soft red winter or hard red winter wheat.

The most expensive, offered by Invivo, was US$336.46 a tonne for soft white

Two weeks ago, at its last tender open to a range of origins, Gasc bought 300,000 tonnes of French and Romanian wheat at an average of less than US $227 a tonne, on an FOB basis.

Gasc's decision comes amid persistent concerns over the competitiveness of US wheat, which – in part thanks to the strength of the dollar – has laboured to secure foreign orders, with exports so far in 2014-15 reaching 13.95m tonnes, down 30 percent year on year.

Indeed, the US is this season, for the first time, expected to be overtaken by the European Union as the world's top ranked wheat exporter.

However, the prices offered to Gasc appeared above those in the broader market, despite the authority's importance as a world buyer.

The Cargill offer is equivalent to about US$7.80 a bushel – more than US$2.50 above Chicago futures, about double the basis that soft red winter wheat has been selling in Gulf ports, according to Benson Quinn Commodities.

Data from the UK's HGCA crop bureau shows soft red winter wheat priced in the US Gulf at US$238.10 a tonne, as of Friday, with hard red winter wheat offered at US$258.20 a tonne.

The elevated offer price may be in part a reflection of the poor quality of this year's soft red winter wheat crop, which suffered from excessive summer rains, causing elevated levels of toxic fungal residues in crops in some areas.

Read the article HERE.

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