EU Grains Mixed, Market Weighs Up Implications Of Egypt News

02/02/16 -- EU grains closed mixed, with perhaps the main news of the day revolving around Egypt's wheat tender.

At the finish, Mar 16 London wheat was up GBP0.25/tonne at GBP106.25/tonne, Mar 16 Paris wheat was EUR1.00/tonne lower at EUR160.00/tonne, Mar 16 corn was flat at EUR153.00/tonne and May 16 rapeseed jumped EUR3.50/tonne to EUR367.75/tonne.

Egypt picked up no offers at all in their wheat tender today. The apparent lack of interest was due it seems to the recent alteration in the terms of the contract to include a zero tolerance to ergot.

Earlier changes to payment can be perhaps coped with, or at least be priced into any offer being made. The chance of suddenly finding yourself with an "afloat" cargo of wheat in the Med suddenly looking for a home is not an appealing one - nor one that is very easy to calculate the cost of when putting up an offer either.

The rejection of a 63,000 MT cargo of French wheat this week will have been costly to the shipper concerned, said to be Bunge. Even if world wheat prices are "cheap" the cost of the cargo concerned, arrived in the Egyptian port of Damietta on a bulk carrier, the Amira, on Dec 21 (six weeks ago yesterday), is reported to be around $12 million.

A spot buyer will now need to be found for this wheat, meaning an inevitable drop in price as the cargo is now "distressed" even if it conforms to other country's acceptable ergot limits. Interest and freight rates might be cheap too, but the cost of leaving $12 million floating around the Med for a month and a half won't have been negligible either. Freight will have been included in the original offer, but the "demurrage" cost of leaving the vessel loading and waiting around will not be recoverable.

So right now, even if they are the largest buyer in the world, Egypt are looking like a risky one from a sellers point of view.

This means that new homes might potentially need to be found for whatever wheat Egypt may have ultimately been in the market to buy in the coming weeks/months before a solution is found to this problem. It also keeps sellers of existing contracts to Egypt nervous ahead of their arrival and acceptance, unless they've been formally customs cleared before they sail.

Egypt have already recently stated that they have plenty of wheat bought to last them through to the beginning of their own harvest that begins not too long from now, so the timing of this latest "hard-line" on ergot has obviously been set to suit.

In other news, Russia may have raised grain exports in January from the 1.5 MMT previously estimated to around 1.65-1.79 MT due to a late month increase in activity due to talk of a change to the wheat export duty. Some 1.3 MMT of that total was probably wheat, they said.

The Russian analysts went on to forecast Feb grain exports at 1.55 MMT, including 1.2 MMT of wheat.

Bangladesh are tendering for 50,000 MT of optional origin milling wheat.