(Bloomberg) – Paris wheat fell to the lowest level in more than 16 months after Egypt, the largest buyer, had to cancel two tenders for grain imports last week following confusion over the quality of shipments it would accept. That’s fueling concern more European supply will pile up.
Egypt’s General Authority for Supply Commodities terminated the tenders as insufficient sellers offered wheat following conflicting statements on the levels of ergot fungus that the country would accept in imports. At the same time, exports from the European Union are lagging 15 percent behind last season, European Commission data showed.
“Egypt is spooking the market as they clamp down on wheat specs,” Alex Bassett and Mike O’Dea of brokerage INTL FCStone Inc., wrote in an e-mailed report. “There is plenty of wheat around and because no one will pay up for it, only a severe weather event could trigger a sustainable rally.”
Paris wheat for March delivery fell as much as 1.6 percent to 153.75 euros ($171) a metric ton on the Euronext exchange, the lowest for a most-active contract since Sept. 26, 2014. It was down 1.3 percent at 154.25 euros by 1:14 p.m. local time. On the Chicago Board of Trade, futures for the same month slid 0.3 percent to $4.6525 a bushel.
Egypt is struggling to get traders to participate in tenders after rejecting a cargo saying it exceeded acceptable ergot levels. The Agriculture Ministry said last month it would turn away grain containing any ergot, even as the state-run buyer said it would accept levels of 0.05 percent, in line with world standards. The ministry has since reversed its stance.
A vessel carrying 63,000 tons of French wheat to Egypt will be sent back home because it exceeded the allowed 0.05 percent level of ergot, Supply Minister Khaled Hanafy said at a press conference in Cairo on Sunday. The nation is looking for alternative sources of wheat beyond tenders, he said, without providing details.
“Despite the reassuring announcements about the quality requirements, the tender launched on Friday, where some exporters participated, was finally canceled,” Agritel said in a report. “GASC has judged the proposals as insufficient and the prices announced too high. The recent rejection of a French wheat shipment due to ergot content has discouraged sellers.”
Egypt’s inability to buy comes as the EU is struggling to offload its harvest, partly due to competition with suppliers from Black Sea regions that are benefiting from weaker local currencies. The European bloc issued licenses to export 15.63 million tons of wheat from July 1 through Feb. 2, down from 18.39 million tons a year earlier, commission data showed.
“The markets are struggling to hold any strength as the world is flush with wheat,” FCStone said. “It is clear the currency wars continue to drive the market and the Black Sea continues to dominate the export market.”
- Corn for March delivery fell 0.4 percent to $3.6425 a bushel as soybeans for the same month slipped 0.4 percent to $8.6425 a bushel.
- Soybean meal for March fell 0.3% to $264.20 for 2,000 pounds.
