Algeria bought 600,000 tonnes of wheat, traders said on Monday, snapping up grain at a time of high prices and tight supply even as neighbouring countries take measures to head off Tunisia-style unrest over food inflation.

Algeria, Libya and Jordan have this month either relaxed food taxes or duties on food imports or cut prices of staple foods, keen to damp down the sort of unrest over food prices which has toppled Tunisian President Zine al-Abidine Ben Ali.

Traders said the latest Algerian buy, which brings its wheat purchases this month to around 1 million tonnes, have been driven by tight supplies after weather problems hit the 2010 harvest in the Black Sea and Europe, sending prices higher.

Alex Bos, commodity strategist at Macquarie Bank said some countries were looking back to 2007/2008 when soaring food prices sparked riots in countries such as Egypt, Cameroon and Haiti and looking to safeguard grain balances.

I think a lot of these major wheat importing countries do want to step in and try and provide a buffer supply internally on the chance that wheat fundamentals become as tight as they were in 2007/08, said Bos

There is certainly a growing nervousness in some of these countries about attaining sufficient wheat supplies for the year ahead, Bos added.

The latest Algerian purchase, which traders said was done last week at prices ranging between $360 and $365 a tonne including cost and freight, follows a buy on January6 of 350,000 tonnes at of wheat at around $353 a tonne.

Some traders put the volume of purchase above 600,000 tonnes, with one citing 750,000 tonnes.

This was just the latest of a series of deals from buyers in the region with traders reporting separately that Libya had purchased about 100,000 tonnes of milling wheat in a tender that closed on January 10.

Last week, Turkey bought 300,000 tonnes of wheat and Lebanon 25,000 tonnes, while Jordan last week tendered for 100,000 tonnes of wheat just as hundreds protested against high prices in the south of the country.

All governments have seen what is happening in Tunisia and be it Algeria or other countries in the region, they will all try to calm food inflation at any price, and this will put pressure on wheat markets, said analyst Michel Portier from French grain analyst Agritel.

DEEP DEMAND

Global wheat prices have been supported after drought hit harvests in Russia and Ukraine while rains damaged crop quality in parts of Europe last year, helping Euronext wheat futures to almost double in 2010.

On Monday, with U.S. grain markets closed for the Martin Luther King Jr public holiday, Euronext March wheat traded up 0.4 percent at 252.00 euros a tonne.

Obviously the Black Sea is out, the European Union is quickly running out of available supplies to export so I think that is going to be a concern for consumers, Rabobank analyst Luke Chandler said.

I think consumers are watching the situation globally and are very concerned about the lack of forward physical sales they have on their books over the coming months he added.

One trader in Germany said the Algerian buy was larger than he would have expected given prevailing market conditions.

Importers would not want to buy at the time of current high prices unless they needed to but some can afford to buy their way out of problems, the trader said, referring to the purchasing power wielded by oil rich Libya and Algeria.

Official media reported earlier this month that Algerian state grains agency OAIC would raise by 18 percent the amount of soft wheat it supplies each month to the local market.

They are clearly trying to build up reserves, another trader said.

Algerian authorities have also announced cuts to import duties and taxes on sugar and cooking oil in response to protests in which two people have been killed and scores injured.

At least four Algerians have set themselves on fire in the past five days, several newspapers reported on Monday, echoing the suicide that triggered the unrest that brought down the leader of neighbouring Tunisia.

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