Back to the complete issue
Sunday, 3 July 2022

GASC makes huge wheat buy + World Bank approves USD 500 mn loan

State makes its biggest wheat buy in a decade as futures dip: State grain buyer GASC last week purchased 815k tons of wheat for shipment in August, September and October, state news agency MENA reports, citing the authority. The purchase of French, Romanian, Russian, and Bulgarian wheat in last Wednesday’s tender was GASC’s largest since at least 2012, Bloomberg data shows.

The breakdown: The order was for 350k tons of French wheat, 240k tons of Romanian wheat, 175k tons from Russia, and 50k tons from Bulgaria. This is the third successful tender GASC has launched since Russia invaded Ukraine. Pre-war, the two countries supplied north of 80% of our wheat imports.

We locked in the grain while prices are lower: GASC bought the wheat at around USD 430-440 per ton on a cost and freight (C&F) basis, with the cheapest prices coming from Romania and the most expensive from France, Reuters reports, citing traders. That’s around 8-10% cheaper than GASC’s last purchase of mostly Romanian wheat in June, though still 58% above prices from the same period last year. Unusually, the purchase is for shipments spread out over several months rather than a matter of weeks, Bloomberg notes, suggesting GASC looked to lock in the greatest amount of grain possible while the price was right.

You can thank recent recession predictions: The outbreak of war in Ukraine at the end of February sent grain prices to a 14-year high and spurred talk of a global food security crisis. But murmurs of a looming global recession as central banks attempt to bring down inflation has cooled the markets. Chicago futures are now trading at their lowest price since February, having fallen by a third since the middle of May.

French grain on the rise? This latest tender offers fresh evidence that France is becoming an important supplier to Egypt after war in Ukraine blocked shipments from the country. France has pledged to support us on food security and led the suppliers in GASC’s first successful tender since war broke out in Ukraine, while the second tender in June was fulfilled by Romanian, Russian, and Bulgarian suppliers. We’ve also been purchasing cargoes directly from suppliers, including most recently a 180k-ton shipment from India.

Egypt’s total wheat imports for FY2022-2023 are expected to come in at 10 mn tons, with the state looking to import some 5-5.5 mn tons of that (with the remainder purchased by the private sector), Supply Minister Ali El Moselhy said last week.

HOW ARE WE PAYING? We’re getting that USD 500 mn loan from the World Bank to boost our food security after the multilateral lender on Wednesday approved extending us the loan first announced in June, according to a statement (pdf). The loan will go towards wheat imports to cover the equivalent of one month’s supply for the nationwide bread subsidy program, the statement read. It will also help upgrade and expand wheat silos and up domestic cereals production in efforts to improve climate resilience.

The breakdown: An earlier World Bank document (pdf) said the program would provide USD 350 mn to GASC to purchase up to 700k tons of wheat; USD 117.5 mn to raise silo capacity, increase the use of high-yielding types of wheat, and improve climate resilience; and USD 2.5 mn to manage the project.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.