Egypt changes wheat procurement strategy to cope with high prices

By Will Horner

Egypt, the world’s largest wheat importer, has changed its long-standing way of buying grain to help it better manage the volatile and high food prices that have resulted from the invasion of Ukraine. by Russia.

In recent weeks, Egypt has reversed its long-standing practice of launching international tenders to buy wheat. Instead, he opted to hold private talks with traders and buy grain directly from suppliers in a system that allows Cairo greater control over prices.

Egypt’s wheat purchases are closely watched by the world grain market. As the biggest buyer of wheat, prices paid by its state import agency – the General Commodity Supply Authority – for wheat shipments are taken as a guide to set benchmark prices.

However, Russia’s invasion of Ukraine and the disruption of global food supplies resulting from the conflict between two of the world’s largest wheat exporters have hampered Egypt’s efforts to replenish its food stocks. cereals.

GASC said the change was prompted by the high and volatile prices it received in international tenders.

The GASC has reportedly made at least three purchases by talking directly to traders since mid-July, according to grain traders and the media. The total amount of wheat purchased would be between 1 million metric tons and 1.5 million metric tons.

Its last international wheat tender in July was canceled after bids it received were deemed too expensive.

US wheat futures prices soared to nearly $13 a bushel in the weeks following Russia’s invasion of Ukraine in February. The conflict and blockade of Ukrainian Black Sea ports have trapped millions of tons of wheat in the country. Prices have come down to around $8 a bushel since the UN brokered a deal that saw some Ukrainian ports reopen to grain shipments.

Yet prices remain volatile and expensive by historical standards. Prior to 2021, the last time wheat traded at $8 a bushel was in 2012. The GASC would likely continue to use direct buying to buy wheat as long as prices remain high and uncertainty surrounding the Global wheat supply would persist, said Hany Younes, an independent grain trader based in Cairo. and broker, said.

“They’re trying to get the benefits of cheaper prices by buying direct,” Mr. Younes said.

Bids in tenders can be $7 to $8 a ton more expensive, he said. “When you buy 240,000 tonnes of grain or more, that’s a lot of money,” he added.

Ensuring an adequate food supply for its population of more than 100 million people is a major concern of Egyptian leaders. The government subsidizes bread for millions of its citizens and regularly buys wheat to fill its strategic stocks.

Egypt will import about 12 million metric tons of wheat this year, according to data from the United States Department of Agriculture, making it the largest importer. Next year, the USDA expects Egypt to slip to second place behind Indonesia.

Write to Will Horner at [email protected]

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