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By John Helmer in Moscow

Russian wheat exporters are increasingly confident of beating US wheat imports in the Egyptian import market after a new deal for 180,000 tonnes of Russian grain, priced at $178.50 per tonne, was announced this week in Cairo, and confirmed by grain trade sources in Moscow. The sale undercuts the US offer price by more than $10 per tonne.

Alexander Korbut, vice-president of the Russian Grain Union, told Fairplay: “Egypt was and remains the biggest importer of Russian wheat. Egyptian consumers prefer rather soft grain with 11.5% protein, and the Russian grain has the best price/quality ratio for Egypt.”

He added that in calendar year 2009 Russian companies exported 4.9 million tonnes of wheat to Egypt, and for the first quarter of this year, the volume was 1.8 million tonnes, well above the year ago level. According to the Egyptian commodity import authority, the Russian share of the Egyptian import market has grown from 40% in 2007 to 58% in 2009. In parallel, the US share of the market dwindled in the same period from 13% to 8%.

Russian grain industry sources hint that the trouble their wheat shipments to Egypt ran into last year was inspired by a combination of Egyptian importers trying to cut the Russian price, and improve their margins; and agents of the US trade trying to stop the rot in their order books. On instructions from Cairo officials, several shipments of Russian grain were arrested on arrival in Egyptian ports on charges that the grain, which had cleared fumigation and inspection at Novorossiysk port on loading, was freshly infested with weevils above permissible levels.

At the time, noone believed the weevils had flown in during the voyage of the cargo through the Black Sea and Mediterranean. The clash of interests lifted the problem to the level of President Dmitry Medvedev, who raised it with President Hosni Mubarak during a state visit to Cairo in June 2009: http://johnhelmer.net/?p=1288

“The recent problems with shipments to Egypt were nothing but a technical issue,” Korbut said. “It has been resolved.”

Alexei Alexeyenko of the Russian foodstuff inspection agency Rosselkhoznadzor (RSKhN) told Fairplay: “Russian grain poses no threat to consumers — this has been confirmed by the Egyptian side, and they have cancelled all the previous claims. We can say that certain circles in the Egyptian government were playing a tricky game with Russian suppliers aimed at removing Russia from the Egyptian market. The problem is — the US used to be Egypt’s largest grain supplier over many years, and we view the recent accidents as a development of unfair competition.”

“It all began when some members of the Egyptian parliament made claims about the potential threat to consumers from Russian grain, despite the fact that the grain had been checked at the Egyptian border and there was no disapproval of the grain’s quality. Eventually the information about the quality of Russian grain was not substantiated.”

“Certainly it cast a shadow on Russia’s reputation, and harmed supply volumes for a time. But lately the shipments have been resumed. The winner is the common sense of the Egyptian market. Russia is closer than the US to that market.”

American wheat exporters concede that their grain has higher protein content than the Russian product, and may be less subject to weevil infestation. However, it costs more, and the price premium is not something Egyptian importers or consumers want to pay. According to Alexeyenko, “the price/quality ratio of the [Russian] grain is profitable for Egyptian consumers.”

As for the tactics of competitors in the grain trade, he added: “The lesson here is that Russia should get prepared for similar episodes in the future and develop prompt reactivity to such provocative moves. I do not exclude that such a situation can repeat. But I believe the Egyptian grain market is sensible enough to understand that there is a political game going on.”

The U.S. Department of Agriculture is predicting that Russia may become the top global wheat exporter in a decade, ahead of Canada and the US.

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