Rising tensions in the tug-of-war between Russia and Ukraine are causing “uncertainty” in the wheat market, Al Shorouk quoted Supply Minister Ali El Moselhy as saying. While the Madbouly government has previously suggested it had no plans to start hedging wheat, El Moselhy is quoted as having said a decision to do so could come by the end of next month.

Why Ukraine matters for our wheat supply: The world’s largest wheat importer, Egypt is also the largest consumer of Ukrainian wheat, last year purchasing the equivalent of around 14% of its total wheat needs from the eastern European country. Now, a potential Russian invasion of Ukraine threatens to disrupt supplies from the country. Prices “spiked” the last time Russia invaded Ukraine (when it seized Crimea back in 2014), according to the Economist. Russia is also a top supplier: around 50% of our wheat imports shipped from the country last year (while 30% came from Ukraine), Al Arabiya reports, picking up a Reuters story citing data from two regional traders.

The Supply Ministry is continuing to work on diversifying wheat imports, El Moselhy added. Diversification efforts that began last year saw us purchase wheat from Latvia for the first time and consider importing from other countries including France, Canada, and possibly the US.

We currently hold more than five months’ worth of wheat in our strategic reserves, El Moselhy said. Wheat prices have been declining over the past two weeks as the market saw a surplus and pandemic-induced demand began to subside, he added.

Wheat prices have been an issue since far before the crisis in Ukraine: Prices hit ten-year highs in the global market last year on the back of reduced crop production in some of the world’s biggest producers, higher shipping costs, and trade tariffs — meaning wheat is likely to sap an additional EGP 12 bn out of the fiscal budget for this fiscal year. Meanwhile, major producer Russia has been mulling higher export tariffs on the grain. As a result, the ministry is considering several scenarios for tapering bread subsidies for the first time in decades, including targeted cuts that ringfence the most vulnerable people and replacing subsidies with cash payments. Expect a final decision on how they will be reworked by the end of March.