A rise in Russian wheat prices is responsible for the decision
By Diego Flammini
A country’s commitment to purchase U.S. wheat shows American ag commodities are becoming more competitive, a commodity strategist said.
Egypt, which purchased 115,000 tons of U.S. wheat during the 2017-18 crop year, is expected to buy up to 1.7 million metric tons of the crop during the 2018-19 marketing year. The increase can be attributed to a Russian shortage.
A depleted supply of Russian wheat with 12.5 percent protein has caused prices surge to about US$250/mt, S&P Global Platts reported.
USDA prices from Friday showed U.S. wheat trading at about US$207/mt.
The U.S. wheat industry should welcome this opportunity to do more business with Egypt, said Moe Agostino, chief commodity strategist with Farms.com Risk Management.
“It’s a pretty good order,” he told Farms.com. “Demand is key to wheat and we need to see more demand to get the prices moving higher. Wheat prices across the Black Sea region (Russia, Ukraine, Belarus and Kazakhstan) hit three-year highs. So, when Egypt buys from that area, it is paying more than it did three months ago.”
Whether Egypt’s planned purchases will result in higher prices for U.S. farmers remains to be seen.
If the U.S. becomes a consistent supplier for Egyptian wheat, markets could move in a bullish direction. But some of that movement also hinges on the U.S. government shutdown, Agostino said.
“We need to start seeing back-to-back weeks where weekly U.S. shipments of wheat are in the millions of metric tons,” he said. “Then the markets will start to get excited. But, because of the government shutdown, we don’t have the data that shows U.S. export shipments.”