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Tuesday, 1 March 2022

We’re struggling to find new wheat supplies

State grain buyer GASC was forced to cancel its wheat tender yesterday on the back of high prices, Bloomberg reports, as global grain markets face turmoil on the back of Russia’s invasion of Ukraine. The two countries together account for nearly a third of the world’s wheat supply, and some 60-80% of our grain imports at any given time.

This is the second tender Egypt has canceled in recent days: GASC called off last Thursday’s tender due to a shortage of offers.

Only three offers were submitted in yesterday’s tender: two for French wheat and one for US grain, Bloomberg cited unidentified traders as saying. Offer prices have reportedly surged by USD 80 per ton since Russia invaded Ukraine. Days before the war broke out, 17 global suppliers took part in a tender that saw GASC lock in three cargoes of Romanian wheat despite Ukrainian suppliers offering a better price. Chicago wheat futures closed up 8.6% in yesterday’s trading.

Why are traders staying away from Black Sea supplies? Although Russian commodities have so far been spared from direct sanctions, traders are avoiding Black Sea wheat due to port closures and logistical hurdles — and the possibility that sanctions are still to come. Shipment disruptions are mounting, with ins. companies either declining to cover Black Sea vessels or charging massive costs, Bloomberg reported yesterday. Russia’s exclusion from the Swift payments system is also threatening the financing of its commodities.

Our alternatives don’t look so hot right now, either: Egypt is eyeing wheat from the US, France, Romania, Kazakhstan, or Germany, Internal Trade Development Authority head Ibrahim Ashmawy said ahead of yesterday’s tender. But our ability to secure alternative supplies has been hobbled by rising costs for grain itself, as well as ins. and shipping.

However, the Supply Ministry is projecting calm. We have enough wheat stockpiled to last up to four months, Supply Minister Ali El Moselhy said earlier this week, adding that local growers will help cover Egypt’s needs until the end of the year. The harvest season starts in April and the government hopes to collect 4 mn tons of the grain.

Expect policymakers to be carefully weighing the global wheat crunch as they look to taper bread subsidies. The Supply Ministry is by the end of the month expected to announce an overhaul of the costly bread subsidy system, which has remained largely unchanged for decades.

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