HAMBURG- Saudi Arabia’s decision to adjust its wheat import requirements, opening the door to Black Sea grain, will cause major upheaval for some European Union exporters who may have to seek alternative markets, traders said.

Saudi state grain buyer SAGO said on Thursday it would relax its bug-damage specifications for wheat imports from its next tender. 

Russia has sought access to Saudi Arabia's wheat market for some time as part of Moscow's bid to take market share from the EU and United States in wheat markets of the Middle East and North Africa.

“Saudi Arabia, Algeria and Iraq are three major markets in which state purchasers have until now kept out Russian wheat,” one European trader said. “Russian wheat is traditionally so cheap and with the advantage of low ocean shipping costs ... it dominates markets it is allowed into.”

Traders expect Russian wheat to move into the Saudi Arabian market on a substantial scale, with existing suppliers in the EU potentially facing a loss of business.

“Saudi Arabia is Germany’s biggest wheat import customer this season, so Germany will be among the biggest losers,” one German trader said.

 

WHEAT IMPORTS

“Poland and the Baltic States, especially Lithuania, also could face losses," the trader said. “Out of about 3.5 million tonnes of annual wheat imports by Saudi Arabia, Germany contributes about 800,000 to 1.3 million tonnes, depending on the year.

"The Baltic States and Poland were responsible for the balance, with some shipments coming from the United States and Argentina, but not every year.”

In the 2018/19 wheat export season which started in July 2018, Germany had exported 673,000 tonnes of wheat to Saudi Arabia up to the end of May 2019, of total German wheat exports of about 2.2 million tonnes, official figures show.

German traders are already discussing alternatives. “Without this exclusivity, German and Baltics wheat will have to price themselves into other markets, probably targeting Algeria now,” one said.

This could mean top EU wheat exporter France, which has been bracing for the possible entry of Russian wheat in Algeria, may face stiffer competition in its main overseas market. urn:newsml:reuters.com:*:nL8N24C25H

Although the entry of Russian wheat into Saudi was getting major attention, traders also stressed wheat from Ukraine, Romania or Bulgaria could win business.

Yet the success of Black Sea region wheat in the Saudi market depends on its quality. Ukrainian wheat may be offered in Saudi Arabian tenders, but the 0.5% bug limit rate is still “quite risky,” a Ukrainian trader said.

Russia will continue to press Saudi Arabia to reduce the bug damage level to 1%, a Russian source said.

(Reporting by Michael Hogan, Gus Trompiz, Polina Devitt and Pavel Polityuk Editing by David Holmes) ((michael.j.hogan@thomsonreuters.com; +49 172 671 36 54; Reuters Messaging: michael.hogan.thomsonreuters.com@reuters.net))