(Bloomberg) --
Russian wheat may be about to crack yet another market.
Saudi Arabia's grains agency will relax rules for bug damage in wheat imports starting with its next tender, according to Governor Ahmad Al-Fares. That will allow more nations, including Black Sea suppliers, to participate, he said.
The move opens the door for Russia, the biggest wheat shipper, to break into the Saudi market after more than a year of talks. It could be bad news for European Union nations such as Germany, which currently dominate sales to the kingdom. Saudi Arabia was the second-largest buyer of EU wheat last season, trade data show.
“It's a breakthrough,” said Dmitry Rylko, director general at the Institute for Agricultural Market Studies, or IKAR, in Moscow. “We may achieve serious success.”
Bigger supplies and competitive prices have helped Russia expand exports across the Middle East and North Africa in recent years, and the country is a key supplier to No. 1 importer Egypt. It aims to gain access to Algeria, a crucial market for France, where Russian grain also doesn't typically meet quality standards.
The Saudi Grains Organization said it will allow 0.5% bug damage in cargoes, compared with a current policy of zero. The move was reported earlier by Reuters.
Saudi Arabia wants to increase purchases of wheat, barley and other products from Russia, Energy Minister Khalid Al-Falih said during a June trip to Moscow. In recent seasons, it sourced most of its wheat from northern European nations. Russia's agriculture minister last month proposed meeting his Saudi counterpart in September.
Russia hasn't yet received a notice on new rules from Saudi Arabia, but if the bug damage rule has been relaxed, it will allow Russian exports to the country, a spokeswoman for Russia's agriculture agency Rosselkhoznadzor said.
Russia could ship 500,000 tons of wheat a year to Saudi Arabia, according to IKAR. It may be able to take market share away from nations such Germany, Poland and Baltic states because of the close proximity of Black Sea ports to the kingdom, Rylko said.
The Saudi Grains Organization last held a wheat tender in late June, seeking grain for September to November delivery.
Saudi Arabia and Russia have recently been cooperating in curbing oil supplies to shore up prices as part of the OPEC+ group. “Good political relations” between the countries may have helped with the wheat issue, Andrey Sizov Jr., managing director at consultant SovEcon said in emailed comments.
To contact the reporters on this story: Anatoly Medetsky in Moscow at amedetsky@bloomberg.net;Sarah Algethami in Riyadh at salgethami@bloomberg.net;Megan Durisin in London at mdurisin1@bloomberg.net
To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Nicholas Larkin, Rachel Graham
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