EGYPT returned to the world wheat market last week, striking deals on Wednesday to buy 350,000 tonnes, the majority of which will come from Europe, following a tender announced two days earlier. earlier by the General Authority for Supply Commodities (GASC).
Prospective suppliers could submit Free On Board (FOB) offers for a shipping period of May 20-31 and/or Cost and Freight (C&F) offers for arrival at Egyptian ports in the window of May 1 to June 15, with payment at sight. Originally, the tender only specified wheat of European origin, sending MATIF wheat futures prices into an upward spiral. The GASC later said bids from Russia and Ukraine would be considered, along with those from Bulgaria, France, Germany, Hungary, Kazakhstan, Latvia, Poland , Romania and Serbia.
This is the first successful international wheat tender since February. He canceled two tenders as wheat prices soared and bids evaporated after Russia invaded Ukraine, temporarily limiting the prospect of wheat being shipped from seaports Black by two of the world’s largest exporters. Egypt is heavily dependent on wheat from Black Sea ports. Total wheat imports over the past five years amounted to 62.6 million tonnes (Mt), of which 59.7% came from Russia and 22.3% from Ukraine, for a combined total of 82% purchases over the period.
France receives four shipments
The majority of business went to France, with four shipments of 60,000 t purchased on an FOB basis at an average price of US$451.75/t. Freight is estimated at $42.50/t, resulting in a landed cost of $494.25/t. A cargo of 50,000 t was also purchased from Bulgaria at $449.50/t FOB, the landed price being $480/t based on freight of $30.50/t. The final cargo of 60,000 t was of Russian origin, purchased on a C&F basis for $460/MT.
The winning Russian bid was submitted by Aston, one of Russia’s largest agricultural and food ingredients companies, with operations in agriculture, oilseed crushing, edible oils and the origin and grain export. The company would have its own vessels, allowing it to mitigate many of the costs that most exporters would currently face when shipping out of the Black Sea. The average price across the entire 350,000t tender was $486.35/t C&F, nearly $150/t higher than the previous GASC tender on February 18 .
War reduces reserves
Earlier this month, the Egyptian government announced that its wheat reserves had fallen significantly since the start of the war in Ukraine in February. Egypt only has enough wheat to meet about 2.6 months of domestic demand, well below historic levels, and less than half of the government’s six-month target. The world’s largest importer typically has up to one month of import volume, or 1 Mt, in transit at any given time. But without tenders for more than two months, there are currently very few boats loaded with wheat on the water.
However, stocks should be boosted by the local harvest, which begins this month. Production is expected to increase by 8.9%, from 9Mt in 2021 to 9.8Mt this year. The higher production is attributable to a higher harvested area, estimated at 1.53 million hectares (Mha) compared to 1.4 Mha last year. The Egyptian authorities hope to increase the harvested area by around 30%, or 420,000 ha, over the next three years.
The Egyptian zone on the rise
The higher acreage came after the government announced its wheat procurement prices ahead of last year’s planting season, allowing producers to make more informed crop rotation decisions. And then, on March 15, in response to the war in Ukraine, the government approved an additional incentive of 65 Egyptian pounds (EGP) per ardeb, or $27.50/t, on the prices it had previously agreed to pay farmers to buy their local products. produces wheat.
After this increase, government payments to farmers will range from EGP 865/ardeb to EGP 885/ardeb or around $366-375/t depending on quality and moisture. The new price is 22% higher than last season’s purchase price and payment will be made in cash upon receipt of the wheat, or within a maximum of 48 hours.
Egypt’s Ministry of Supply and Internal Trade (MoSIT) has also issued a ministerial decree requiring every wheat farmer to sell a minimum of 12 ardebs per feddan, or 4.28 t/ha, to government wheat suppliers this season. of harvest. The decision prohibits farmers from selling the rest of their wheat production to non-governmental organizations unless a permit has first been obtained from the MoSIT.
The decree also stipulated that large farms (over 10 hectares) were to sell 90% of their wheat production to government wheat merchants and, in return, would receive subsidized fertilizer for their summer cropping program.
The government aims to source 6 Mt of wheat from local producers this harvest, a historically high level of 61.2% of estimated national production. This target is 66.7 pc higher than last year’s purchases of 3.6 Mt and 71.4 pc higher than 2020’s purchases of 3.5 Mt. instead of April 15 and will continue until the end of August instead of mid-July.
India gets access
Egypt’s latest tender came just two days before an agreement was announced to source wheat from India, adding the world’s second largest producer and occasional exporter to the list of 17 other origins international imports accepted by the GASC. Logistical limitations and quality issues have long hampered India’s efforts to sell large volumes of wheat on the world market. However, a series of bumper harvests and the bumper demand resulting from the Ukrainian crisis provided additional incentive for India to address the myriad of export constraints.
In an announcement last Friday, India’s trade minister said Egypt is likely to buy around 1 Mt of wheat from India, of which 240,000 t are expected to be shipped in April. India’s acceptance reportedly came after a rigorous process of on-site visits and verifications of Indian quarantine facilities by Egyptian authorities due to fears that Indian wheat imports may contain Karnal bunt, a threat to national production.
India is just one of many wheat import origins being considered by Egypt as it tries to reduce its dependence on Black Sea exporters, Russia in particular, to following the major supply disruption resulting from the conflict in Ukraine. The USDA has cut its Egyptian wheat import forecast by 500,000 t due to higher prices and disruptions in Black Sea supplies. However, the North African nation still has some way to go to meet the wheat import target of 12 Mt for the 2021-22 marketing year, which would allow it to meet domestic demand and slightly rebuild stocks.