Russia has aggress ively undercut rivals to quickly reestablish itself in global wheat exports markets after an absence of almost a year but key buyers such as Egypt are likely to look to spread their supply risks once the price gap narrows.
Exports from both Russia and neighbour Ukraine are expected to rebound strongly in the 2011-12 season as production recovers following last year’s drought , the worst in decades.
Both Black Sea producers are looking to win back customers although some importers may be wary after being forced to scramble for alternative supplies after Russia imposed a ban on exports in August 2010.
Top wheat importer Egypt was initially reluctant to allow Russia, by far its most important supplier in the pre-drought 2009-10 season, to participate in tenders called by the main state buyer but allowed them back last week and could not resist the low prices offered.
“Russian exporters need to re-establish their positions in their traditional markets…If not for the aggressiveness, Russia would not have won the Egyptian tender,” said Andrei Sizov Sr., chief executive and president of agricultural analysts SovEcon.
France and the United States were Egypt’s key suppliers in the 2010-11 season.
“Russia’s presence with large quantities in the market this year will reduce prices and lead to bigger participation from the Russian side. We are also very keen on having other origins take part but at more competitive prices,” said Nomani Nomani, vice-chairman of Egypt’s main state wheat buyer, GASC.
Macquarie analyst Alex Bos said major buyers would be reluctant to become too dependent on one supplier.
Food inflation and security are hot issues in many countries following tumult in the Arab world sparked in part by anger over food prices, which saw the president of Egypt toppled earlier this year.
Estimates for the Russian harvest this year range to as high as 92 million tonnes of grain, although official estimates put the crop at 85 million, up from 61 million tonnes in 2010.
Jordan last week became the first major buyer of Russian wheat since the end of an export ban on July 1, purchasing 150,000 tonnes. Egypt followed with 180,000 tonnes.