New Saudi Arabia wheat tender looks to gain from falling futures

Saudi Arabia’s state grains agency SAGO returned to the wheat market Thursday, as it sought to take advantage of a fall in futures prices by tendering for optional-origin milling wheat.

The tender, for April-June shipment, comes after the first fall in futures prices on Wednesday. This came after a rally extending to five consecutive days in which wheat prices gained 11%, reaching a five-month high on fears that cold weather in North America has damaged the US wheat crop.

SAGO is tendering for 715,000 mt in 12 cargoes – seven to Jeddah, four to Dammam, and one to Jizan – for April-June delivery, with bidding set to close Friday evening.

At its previous wheat tender on December 4, SAGO bought 495,000 mt of wheat at an average price of $230.53/mt CFR.

With French-origin 11% protein wheat at approximately $206/mt FOB, Baltic-origin 12.5% protein wheat at approximately $212/mt FOB, EU sellers look well-placed to take advantage of the timing of the tender.

In a SAGO-issued report Tuesday, freight rates from Dunkerque were said to be $26/mt and $24.30/mt from Hamburg.

Argentinian milling wheat is the most competitively-priced origin according to Agricensus’ assessments at $187/mt FOB Up River, although Saudi Arabia has not imported Argentinian wheat since March 2015.

Russian 12.5% protein wheat would be the next cheapest origin at $197/mt FOB Novorossiysk but is currently excluded from SAGO tenders as it typically exceeds bug damage tolerance levels.