Back to the complete issue
Monday, 14 February 2022

Ukraine crisis spurs “uncertainty” in wheat market -El Moselhy

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.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.