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Tuesday, 15 March 2022

Gov’t to up local wheat prices and cut fertilizer costs — and appears to be considering price caps for unsubsidized bread

A raft of new wheat-related measures announced by the Madbouly government yesterday aim to bolster the country’s food security in the wake of the Russia-Ukraine war.

The Supply Ministry has once again hiked local wheat purchase targets: The government is now aiming to buy more than 6 mn tonnes of domestic wheat this harvest season, up from its previous 5.5 mn-tonne target, Supply Minister Ali El Moselhy said yesterday.

The government had previously upped its local target by nearly 40% in the days after Russia invaded Ukraine. The war in Europe has put into question the continued supply of up to 80% of our wheat imports and thrown the global grain markets into disarray. Prior to the arrival of two shipments last week, we had enough wheat in reserve to sustain us for 4.5 months and the local harvest — which begins in April — should provide another four months of supply, the government has said.

The government is going to pay more for the wheat it buys from domestic farmers, cabinet spokesperson Nader Saad said during a televised interview last night (watch, runtime 1:49). The new price will be announced soon, he said.

Farmers had called on the government to raise prices and purchase wheat for EGP 1k per ardib, up from EGP 820, to help the domestic industry cope with inflation and meet production targets. “If the government doesn’t raise prices, it won’t be able to collect even 3 mn tonnes of wheat” this season, said Farmers’ Syndicate head Hussein Abu Saddam.

The government is also set to make new announcements on subsidized fertilizer prices for wheat farmers, Saad said on Kelma Akhira. Surging fertilizer prices is currently one of the key impediments for Egyptian farmers, people in the industry say.

But where is it going to store all this wheat? Egypt currently only has storage capacity of around 3.4 mn tonnes, according to Bloomberg Asharq, raising questions about where it plans to put the extra quantities of local wheat.

Are price caps for unsubsidized bread in the works? We can expect to see a “new mechanism” to regulate the price of unsubsidized bread soon, said Saad (watch, runtime 3:16). The planned regulations will put into consideration global inflation, wheat prices, and will be fair to the end-consumer as well as bakeries, Saad said, after show host Lamees El Hadidi said that the price of unsubsidized bread “has now risen by 100%” amid the global surge in wheat prices.

The government is also stepping in to avoid price increases at private bakeries by effectively subsidizing the bakeries and selling them flour at a discounted rate, Ragab Shehata, head of the Rice Division of the Federation of Industries, said Sunday. As of yesterday, private bakeries have been able to purchase a ton of flour from the government for EGP 8.5k, 22% below its current market price.

IN GLOBAL COMMODITIES NEWS-

Not helping global food insecurity: Russia has signaled that it could join the wave of food protectionism and ban (some?) wheat, corn, rye and barley exports until the end of June, the Agriculture Ministry told Interfax. A decision could come into effect today and would last until 30 June, the news agency reported. Russia is the world’s largest wheat exporter, producing 16% of global supply, according to USDA data (pdf). The country also supplies 13% of the world’s barley.

This isn’t a complete ban, Reuters reported the country’s deputy prime minister as saying yesterday. “Export of grain within the quota under individual licenses will be allowed,” Viktoria Abramchenko said, playing down the impact of the ban on global markets.

Russia would join Egypt and a number of other countries to put curbs on key exports: Egypt last week banned the export of key food commodities including wheat, flour, oils and corn. The ban will last for three months.

Also not helping global food insecurity: German agrochemical conglomerate Bayer has threatened to suspend the sale of essential crop supply to Russia unless the country withdraws from Ukraine — a move that would likely cause further volatility in global food prices, the Financial Times reports.

GOOD NEWS- Oil prices continued to slide yesterday on hopes that Russia and Ukraine were moving towards a peace agreement. Brent crude fell another 5% to reach USD 106.90 a barrel. The oil benchmark has now fallen more than 20% after soaring to USD 130 last week.

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