Exclusive: Russia ships first wheat cargo to Saudi Arabia after export door opens

MOSCOW/HAMBURG (Reuters) – A symbolic 60,000 tonne cargo of Russian wheat has set sail for Saudi Arabia from a Black Sea port seven months after conditions were set to allow the trade, three sources told Reuters on Thursday.

Russia’s agriculture safety watchdog, Rosselkhoznadzor, confirmed the cargo had departed in a statement.

The world’s largest wheat exporter had long sought access to the Saudi market along with ongoing efforts to gain access to Algeria and Iraq.

If Riyadh deems the initial cargo acceptable, large volumes could well follow the initial shipment.

Saudi state grain buyer SAGO did not reply to a Reuters request for comment.

The cargo was sent by a trading house under a tender with optional origin it won a couple of months ago, the two trade sources and a third familiar with the matter said.

Saudi Arabia moved last August to smooth a path for Russian wheat imports by relaxing import specifications. That was seen as a sign of strengthening ties with Moscow beyond cooperation on oil, weeks before Russia’s President Vladimir Putin visited the country.

The shipment comes at another crucial moment in relations between Moscow and Riyadh as OPEC and its allies led by Russia meet on Thursday to try to agree what would be the biggest cut in oil output ever as global demand sinks due to the novel coronavirus crisis.

The fast spreading virus has also piled pressure on food supply chains around the globe.

“In these difficult times, food systems supply chains should remain open and resilient beyond political ideologies,” one Middle East-based trader said.

FUTURE SUPPLIES

Black Sea wheat – produced by Russia, Ukraine or Romania – is often cheaper for Saudi Arabia in terms of freight due to shorter voyage times, he added.

However, the size of future supplies will depend on the quality controls in Saudi Arabia.

“I think exporters of Russian wheat have been worried that cargos could be rejected by Saudi Arabia if there are disagreements about quality as has been seen in the past in Egypt,” one German trader said.

Such rejections can lead to financial losses for the seller, who often faces extra port costs and the difficulty of re-selling a consignment which has been spurned as below-standard by one buyer, he said.

“But it looks like the quality of Russian wheat is judged to be good enough to meet the Saudi standards. If Russian wheat is accepted by Saudi inspectors I think more will follow,” he said.

Russian specialists made preliminary checks that wheat in the supply met Saudi requirements, the agriculture watchdog said.

Demand from Saudi Arabia is likely to remain strong as major food importers try to increase strategic reserves in response to COVID-19.

SAGO said earlier this week it was asking Saudi investors with farmland overseas to import 355,000 tonnes of wheat into the kingdom.

Saudi Arabia does not have any farmland in Russia, but SALIC, the agricultural arm of the country’s sovereign wealth fund, said previously it was considering investment projects in the Russian agricultural sector.