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Monday, 16 May 2022

Egypt to receive 500k tons of Indian wheat despite export ban

FROM THE DEPT. OF GOOD NEWS- We’ve locked in 500k tons of Indian wheat ahead of New Delhi's export ban: Egypt has agreed to buy 500k tons of wheat from India, Supply Minister Ali El Moselhy told Reuters yesterday, adding that an export ban introduced by New Delhi last week will not impact the shipment.

REMINDER- India has introduced a wheat export ban in response to surging local prices and a severe heatwave that is threatening to hit production. The decision was taken to “manage the overall food security of the country” though the government will still permit shipments under existing letters of credit.

But what about future purchases? Egypt is in talks with India about being exempted from the export ban. New Delhi said (pdf) last week that it would continue to ship wheat to “vulnerable developing countries … that are unable to access adequate wheat supplies,” provided they seek permission from the government. Friendly ties between our two countries dating back more than a generation to the Nasser-era Non-Alignment Movement suggest we have a good chance of getting that exemption.

Could this be the beginning of an “easier” wheat purchasing process? Moselhy said that the government gave state grain buyer GASC approval to sidestep its tender process and purchase wheat directly from countries or private sector traders.

Diversification is the name of the game: This comes amid ongoing talks with Kazakhstan, France and Argentina under efforts to diversify wheat imports. Egypt, the world’s largest wheat importer, continues to be hit from a grain shortage triggered by the Russia-Ukraine war. The two countries together supply more than 80% of our imported wheat in peacetime.

We’ve already purchased a 55k-ton shipment of Indian wheat: The ship is expected to depart from India soon after it passed the inspection of Egyptian officials last week.

The latest from the local harvest: The government has bought some 1.75 mn tons of local wheat since the start of the harvest season at the beginning of April, Reuters quoted a senior Agriculture Ministry official as saying. That’s just shy of a third of its 6 mn-ton target. The local harvest will run through to the end of August but the bulk of production will take place in April and May, by which time 75% of the country’s wheat will have been harvested.

Reserves are looking healthier: The government currently has enough wheat reserves to cover four months, Prime Minister Moustafa Madbouly said during yesterday’s bumper press conference (see our full coverage above). We had enough wheat to cover only 2.6 months-worth as of early April.

Background: The government has shifted its focus to local harvest to help plug the wheat shortage resulting from the Russia-Ukraine war. The government has said it plans to spend around EGP 36 bn to purchase 6 mn tons of wheat from local farmers — nearly double the 3.5 mn tons purchased last season — to replenish strategic reserves.

IN OTHER COMMODITIES NEWS-

Our food exports rose 5.8% y-o-y to USD 1.05 bn in 1Q 2022, up from USD 996 mn in the same period last year, according to the latest figures from the Food Export Council. Arab countries were the biggest buyers, accounting for more than half of food exports (USD 588 mn or 56%) during the quarter. EU countries came second in the list, with imports worth USD 169 mn (16%). Non-Arab African countries (7%) and the US (6%) were our next biggest customers.

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