Egypt’s Hunt for Wheat Gains Urgency as Stockpiles Shrink

Egypt, the world’s biggest wheat buyer, is accelerating efforts to ensure the supplies needed to feed its citizens as the war in Ukraine upends the global grains trade.

The Egyptian government buys wheat in regular international tenders, which have for years been dominated by low-cost supplies from Russia and Ukraine. The country abandoned two tenders immediately after the invasion, leaving wheat stockpiles increasingly tight — they recently stood at just two and a half months worth. The local harvest will soon help replenish supplies, but Egypt needs to make sure it’s building reserves for the coming year.

The state buyer has now scheduled a new tender for Wednesday, a month sooner than the supply minister had indicated it would return to the market. The government is drawing up plans to allow buying wheat outside of the tender system to bolster purchases, Bloomberg reported earlier. And the country is actively pursuing new sources — a delegation from Egypt visited India this week to discuss the potential for wheat supplies, according to a person familiar with the matter.

Russia’s attack on Ukraine has sent global grain prices soaring, with Chicago wheat futures leaping 44% since the start of the year. That leaves import-reliant nations particularly vulnerable, with people’s resilience across the Middle East and North Africa at a “breaking point,” according to the United Nations’ World Food Programme.

In Egypt, the government’s wheat imports form the cornerstone of a bread-subsidy program for millions of people, and the soaring prices are putting growing pressure on state finances. More broadly, surging food costs are arriving just as the Muslim world marks Ramadan and pose a particular challenge in North Africa because of a legacy of economic mismanagement, drought and social unrest. Wheat is a staple across the region.

Wheat futures in Chicago rallied as much as 3.3% on Tuesday, and the Paris milling-wheat contract closed at a record settlement price. Egyptian tenders tend to be closely watched by the global grains world, and this week’s purchase will get even more scrutiny as traders and investors assess the origins, price and freight costs of wheat being offered.

Both Russia and Ukraine have become heavyweights in Egyptian wheat purchases, providing more than 80% of its imports the last five years. That’s been upended in the past two months, with Ukrainian ports largely shut since Russia invaded, stalling seaborne trade. Russian grain is still flowing, although freight rates are surging in the Black Sea.

Wednesday’s tender is open to European supplies, Egypt’s state buyer said late Monday. Offers will be accepted from 11 countries, including France, Russia, Germany and Romania, according to a copy of the tender document seen by Bloomberg. The country was forced to scrap the past two tenders after offers dried up and costs surged, but it received all Russian wheat it previously ordered, the supply minister said last month.

India, which has recently emerged as a significant exporter, has been in talks to begin sales to Egypt.

From the European Union, Egypt often sources wheat from Romania, another major Black Sea shipper. The country accounts for more than 40% of its tender purchases so far this season, and Egypt also booked one cargo from France.

Egypt’s government accounts for about 40% of the country’s wheat purchases, and the rest is booked by the private sector, according to the U.S. Department of Agriculture’s foreign service.

 

Bloomberg

Tags: Russia, Egypt, EU, Black Sea region, wheat, India, Ukraine