We’re getting wheat from Ukraine, Russia and Romania within days — and local farmers are pushing the state to pay more for the domestic harvest
Shipments of Black Sea wheat are on their way to Egypt: Several cargoes totaling 189k tonnes of Ukrainian, Russian and Romanian wheat are on their way to Egypt even as the war in Ukraine continues to disrupt commercial shipping in the Black Sea. Egypt will receive 63k tonnes of wheat from each country in the coming days, the Supply Ministry said in a statement yesterday, helping to shore up the country’s reserves amid a supply shock caused by the conflict.
That’s not all: Egypt received 126k tonnes of French and Romanian wheat last week, the ministry said.
The latest shipments have made it out of port despite Russia’s invasion of Ukraine: The conflict is causing serious disruption to exports from the two countries, which supply around a third of the world’s supply of wheat and around 80% of Egypt’s grain imports. The ministry didn’t disclose which ports the shipments have departed from.
Signs of normalization? Russia seems to be easing restrictions on commercial traffic in the Black Sea and has in recent days allowed 30 ships carrying grains to depart Russian ports, Bloomberg reported last week, citing Interfax. Moscow had closed the sea of Azov to commercial ships after it launched its invasion of Ukraine, preventing the export of grains and other commodities from its Azov port.
Conflicting signals? Ukraine was reported last Wednesday to have banned the export of wheat, oats and other staples. The same day, Canada’s Globe and Mail quoted the head of the country’s grain association as confirming reports the country would move wheat by rail to neighboring countries including Romania, Hungary, Slovakia and Poland. The country reportedly has 20 mn tons of wheat and corn in storage. It closed its Black Sea ports to commercial ships after the conflict broke out and has said they will remain closed as long as the fighting continues.
The shipments are good news for Egypt: State grains buyer GASC had canceled two tenders in the early days of the war amid spiraling prices and was reported by Reuters to have agreed to an extended shipment deadline for at least one of several cargoes reportedly stuck in Ukraine at the start of March. It is also said to be offering more flexibility over documentation. Two cargoes carrying 120k tonnes of wheat had been stuck in port in the Black Sea as of 4 March.
The gov’t is working several angles to shore up food security as war continues in Easter Europe: It is looking to up its production of local wheat, has banned the export of staple foods for three months, and is trying to diversify supply away from the embattled Black Sea region. The country currently has enough wheat in reserve to sustain it for 4.5 months and the local harvest should provide another four months of supply.
The fiscal impact is going to be significant: The Finance Ministry expects soaring wheat prices to add up to EGP 15 bn to its import bill this fiscal year and is already rethinking its fiscal targets as a result. Global wheat prices have surged 48% over the past two weeks, adding more than USD 100 to the price per ton and sending local bread prices soaring.
But upping local wheat will also come with a price: Faced with surging fertilizer prices and rising labor costs, local farmers are calling on the government to raise local wheat prices by 22% in order for them to meet production targets, Farmers’ Syndicate head Hussein Abu Saddam told Bloomberg Asharq. The syndicate wants the government to purchase wheat for EGP 1k per ardib, up from EGP 820, to help the domestic industry cope with inflation.
The gov’t already hiked prices by 13% from last year: The supply, agriculture and finance ministries raised prices to EGP 800-820 per ardib ahead of this year’s planting season in response to decade-high wheat prices in the global market — and that was before Russia’s war effectively suspended 30% of the world’s wheat supply. “The price offered by the government is not appropriate. Everything has increased in price, from fertilizers to equipment to the cost of labor, so why only the price of wheat remains the same,” one farmer told the newspaper.
Farmers warn that if the price isn’t right, they won’t produce enough to meet the government’s ambitious target: The Supply Ministry hiked local purchase targets to 5.5 mn tonnes at the war’s outset from an earlier 4 mn tons. The move is meant to shore up reserves, but the syndicate is warning that it will not be able to meet this unless the state offers better pricing. “If the government doesn’t raise prices, it won’t be able to collect even 3 mn tonnes of wheat” this season, Abu Saddam told Asharq.
Incentives are in the works: Adding details to incentives signposted last week, the government will try to help out farmers by upping its supply of fertilizer and speeding up transactions, Deputy Agriculture Minister Mohamed El Kersh said in a phone-in with Kelma Akhira’s Lamees El Hadidi (watch, runtime 4:23). The ministry also wants to allocate another 800k acres of agricultural land to cultivating wheat, he said.
But it is unclear whether it is willing to negotiate on prices: “So far, there are no signs that the government will increase the price of wheat,” another farmer said.