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Sunday, 20 February 2022

We just bought tons of Romanian wheat in a packed tender — even though Ukraine’s bid was cheaper

The General Authority for Supply Commodities (GASC) just bought 180k tons of Romanian wheat for April shipment in a tender that may help ease policymakers’ concerns about spiking food prices. Seventeen global suppliers took part in last week’s tender — the most in at least five years — indicating that supply issues that have contributed to the price surge may be abating, Bloomberg reported Thursday.

Wheat supply worries? What supply worries? Wheat futures have been rising lately due to concerns about tightening supplies among the world's top exporters. And it’s not just a wheat problem: Global food prices are close to record highs as supply chain disruptions, rising energy prices, poor weather and labor shortages cause markets to tighten.

The Russia-Ukraine factor: Last week, Supply Minister Ali El Moselhy said that escalating tensions between Russia and Ukraine — two of the world’s biggest wheat exporters — was causing “uncertainty” in the global wheat market. Around 50% of our wheat imports were shipped from Russia last year, while 30% came from Ukraine.

Egypt seems to have avoided Ukrainian wheat in the tender: GASC purchased three cargos of Romanian wheat for USD 318 FOB despite Ukrainian suppliers offering a better price. The price of Ukrainian wheat declined 4% during the first two weeks of February, while Russian wheat fell USD 11 in January due to the increasing regional tensions and Moscow’s export controls, according to S&P Global Platts data.

The Supply Ministry is projecting calm, pointing last week to Egypt’s work to diversify suppliers and the local harvest that begins in April. But while we may not be facing an immediate wheat shortage, steps are being taken to mitigate the impact of rising global prices. The ministry is considering several scenarios for tapering bread subsidies for the first time in decades, with a final decision on how they will be reworked by the end of March. The government is also considering hedging wheat. Egypt currently has a 4.5-month reserve of wheat on hand, Prime Minister Moustafa Madbouly said last week.

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