Saudi Arabia becomes major importer of hard and soft wheat

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GSFMO buys 780,000 tons of wheat in tender.

GSFMO buys 780,000 tons of wheat in tender.

JEDDAH – Saudi Arabia bought 780,000 tons of hard and soft wheat in a tender for shipment periods between September 10 and November 30, the Grain Silos and Flour Mills Organization (GSFMO) said on Monday.

Of the total, it bought 660,000 tons of hard wheat and 120,000 tons of soft wheat.

The accepted origins are the European Union, North and South America and Australia at the sellers’ option, the GSFMO said.

The wheat is to be shipped in 13 consignments, with 420,000 tons for shipment to the port of Jeddah and 360,000 tons for the port of Dammam, GSFMO Director General Waleed Elkhereiji said in a statement.

Saudi Arabia has become a major importer of hard and soft wheat since abandoning plans for self-sufficiency in wheat in 2008 as farming in the desert strained water supplies.

The country aims to steadily reduce agriculture and plans to be completely reliant on imports by 2016 to save water.

Saudi Arabia has so far purchased a limited amount of wheat from its local farmers amounting to 400 tons, a statement by the GSFMO to the official news agency said.

The Kingdom plans to buy only 500 tons of local wheat this year from its farmers. It has so far purchased 2.1 million tons on the international market, the official SPA said.

Saudi Arabia has previously said it plans to import 2.7 million tons of foreign wheat this year.

A pick-up in wheat buying by major importers gathered steam as Egypt, the top importing country, and Saudi Arabia bought nearly 1million tons between them in two days.

Saudi Arabia’s GSFMO grain authority on Monday revealed that it had bought 780,000 tons of soft and, mainly, hard wheat, for shipment between September 10 and the end of November.

This represents an unusually large order even for GSFMO, which two weeks ago estimated it would import 2.7 million tons of wheat this year, up 100,000 tons on 2013.

Saudi Arabia’s import needs are rising thanks to a policy of phasing out support for domestic production, which uses large amounts of valuable ground water reserves.

Monday’s order was priced at $289.89 a ton and $291.25 a ton for two soft wheat cargoes, on a cost and freight basis.

The 11 hard red winter wheat cargos were purchased for $288.48-309.90 a ton on a cost and freight basis.

GSFMO offered no details about the countries from which the grain was being sourced, although acceptable origins were specified as Australia, the European Union and North and South America.

The order comes two days after Egypt’s Gasc grain authority purchased 180,000 tons of Romanian and Russian wheat at tender, taking its total this year to some 5.4m tons, at a cost of more than $1.5 billion.

Romania again scooped the majority of the order, at 120,000 tons, with orders priced at $252.50 a ton and $252.28 a ton, excluding shipping, but exploiting its low freight cost to Egypt too.

Romania, while a relatively small wheat producing country, counts above its weight in Egyptian tenders thanks to the competitiveness of its grain, and has been indeed the top origin in 2013-14, with some 1.9 million tons.

However, the cheapest order was actually a Russian one, at $251.74 a ton, which accounted for the other 60,000 tons of the order.

French wheat came a little closer to competitiveness, with the cheapest order prices at $257.69 a ton, some $5 a ton out of the running, but more than $2 a ton cheaper than the last tender, two weeks ago.

However, shipping charges from France are significantly more expensive than from the Black Sea, and French supplies, which typically come in with relatively high moisture rates, may also suffer penalties on this score.

US soft wheat was offered at $264 a ton, compared with $255.74 at the previous tender.

Wheat prices on the Chicago futures exchange have changed little during the intervening period.

Other wheat purchases in the last week include 96,180 tons of US grain purchased by Taiwan, 90,000 tons of Black Sea supplies bought by Pakistan, and 120,000 tons bought by the United Arab Emirates, also from the Black Sea.

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