Saudi tender not all roses
IN OCTOBER last year Saudi Arabia’s state grain buyer, the Saudi Grains Organization, assumed responsibility for the purchase of the state’s wheat and feed barley requirements.
Last week it announced the results of its second tender, buying 1.5MMT of feed barley for arrival from second half March through to first half May.
A total of 22 companies from across the globe participated in the tender with 25 optional origin panamax (60,000 metric tonne) cargoes booked in the deal.
Australia, South America, European Union and Black Sea were the nominated origins.
According to SAGO, around 1.2MMT will be shipped to Saudi Arabia’s Red Sea ports with values ranging from US$185.81 to US$193.99 C&F.
The balance will be discharged at Persian Gulf ports at values ranging from US$190.91 to $195.88 C&F.
Prices are higher than the first tender back in December with Red Sea and Gulf values up around US$3 and US$10 respectively.
Under SAGO, the Saudi Arabian tenders have changed from load dates to arrival dates, adding risk from an exporter’s viewpoint.
Additionally, both of the tenders to date have been for nearby positions, which means they are effectively paying a premium as exporters build the possibility of delay penalties into their offers.
From an Australian origin perspective, there are several key points to note.
Price is not the limiting factor here as South Australian barley is the cheapest in the world right now and works comfortably into the Saudi sales.
It appears to be stem capacity that is limiting the ability of Australian exporters to participate meaningfully.
Australian ports currently have an extremely busy export program and most shipping slots have already been allocated.
Exporters who have bought shipping slots cannot afford to hold them back on the chance that they may win Saudi tender business as the cost of forfeiting the elevation capacity is extremely high.
Furthermore, the panamax capable ports are the ones with the most stem pressure, therefore they have less unallocated capacity.
Another factor here may well be the current low price environment.
There certainly seems to be some reluctance in grower land to engage the market at the current values.
This is being reinforced on the east coast where extremely hot and dry conditions are encouraging the grower to hold and wait for a possible market rally.
While current values should buy export business, the combination of limited available elevation capacity and lack of selling makes it difficult for exporters to book new business.