Written by Whitney McFerron and Salma El Wardany | From Bloomberg News
Egypt, which got a $100 million credit line from the U.S. to purchase American wheat, said it canceled a tender to buy the grain Wednesday because prices were too high.
The U.S. wheat offered by companies including Cargill Inc. and Bunge Ltd. was “much higher than world prices,” said Mamdouh Abdel Fattah, vice chairman of the state-run General Authority for Supply Commodities. Egypt, the world’s largest wheat importer, hasn’t bought U.S. grain though its state-run tender system since September, Bloomberg data show.
“U.S. prices are exaggerated,” Fattah said by telephone from Cairo. “We will have to think of other origins to cover market needs.”
U.S. exporters have struggled to be competitive in North African markets against cheaper supplies from Europe. The European Union had a record wheat harvest this season, leaving ample stockpiles of grain to ship, while U.S. production dropped to a three-year low, according to the U.S. Department of Agriculture. A stronger U.S. dollar also has made the grain more expensive relative to European supplies.
Offers for U.S. wheat in the canceled tender ranged from $287 to $336.46 a metric ton, according to a GASC document. That compares with an average price of $236.25 a ton for French and Romanian wheat in Egypt’s last international tender on Feb. 3.
The U.S.’s extension of a credit line to Egypt to encourage buying of American supplies also bolstered U.S. prices in the past two weeks, making the grain even less competitive, said Matt Ammermann, a commodity risk manager at INTL FCStone Inc. in Plymouth, Minnesota. Egypt doesn’t have a time limit to use the U.S. credit, Supply Minister Khaled Hanafy said in a Feb. 5 interview.
Wheat futures fell 1.6 percent to $5.2325 a bushel at 10:22 a.m. on the Chicago Board of Trade, erasing an earlier gain of as much as 1.5 percent. Milling wheat in Paris dropped 0.9 percent to 187.75 euros ($213.36) a ton on Euronext.
“We could see prices come down” after Egypt’s cancelation, Ammermann said in a telephone interview. “The U.S. is too high. France is still the cheapest in the world right now.”