Банкеръ Weekly



The successive, fourth tender for milling wheat from the State Reserve on the floor of the Sofia Commodity Exchange distributed 23,090 tons between the partcipants - about 100 mills - at BGN248/t before VAT. There were no surprises, the price and the bidding followed the already known procedure. The only unexpected thing was the intervening of the State Reserve's broker when a quantity above the announced 20,000 tons was demanded. Experts comment that the intervention was aimed to restrict the increase of the price on the exchange up to acceptable (according to the Agriculture Ministry) levels. If the State Reserve's broker had not released additionally some 3,000 tons, the price of grain could again exceed BGN250/ton. After the fourth tender it became clear that about 50,000 tons of the so far sold 88,000 tons have been paid. Orders for loading have been issued for some 35,000-40,000 tons, and the really drawn quantity is not more than 20,000-25,000 tons. The first reactions of buyers confirmed the forecasts of the BANKER weekly that after the first tender on September 17 that the quality of the grain won't be good. While the required gluten index is 21-22, that of the batches released so far was about 17. This means that the wheat is of fodder type and could be used for flour and bread only if mixed with grain of a better quality. Nobody could tell how that happened, as when the wheat was purchased by the State Reserve its baking qualities were mandatorily checked as well as its gluten index had to be at least 22. The closed contracts are for grain of such quality. Nevertheless, mills still buy grain on the Commodity Exchange due to the lower prices there. Over-the-counter prices of milling wheat from the new crop are in the range of BGN280-290/ton, while the prices of grain from the State Reserve with additional costs included reach BGN255-260/ton. A new incerase of the quantity of grain offered by the State Reserve is expected next week and the price will probably remain unchanged at BGN245-248/ton. With that intervention the quantity of 100,000 tons, deblocked in September by a Council of Ministers decision, will be exceeded. If that happens, the Government should give a new permission for the release of additional quantities.

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