Egypt Tempts to Kazakh Wheat Amid Low Price Options from EU
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As of 2022, Wheat production in Egypt amounted to approximately 9.8 million metric tons, representing an increase of 8.9 percent from the preceding year. During the last decade, Egyptian Wheat production ranged between 7.2 and 9.8 million metric tons in 2010 and 2022, respectively. According to a report by the Food and Agriculture Organization, Egypt is expected to be the world’s largest Wheat importer for the fiscal year 2023-24.
Egypt has a population of 113 million people and is striving to reduce its import costs due to foreign currency shortages that have led to delays in Wheat payment. So, Egypt is in talks with UAE-based Abu Dhabi Commercial Bank (ADBC) for the potential financing (loan) of its Wheat purchases from Kazakstan.
This development could offer Egypt an economical substitute for the Wheat it imports from Russia. Russia has been supplying an increasing share of Egypt’s Wheat since last year, but recently, they declined to fulfill a purchase deal that fell below the unofficial minimum price set for Wheat purchases.
Negotiations for the loan arrangement aimed at procuring Wheat from Kazakhstan are still at an early stage, encompassing discussions on Wheat prices, quantities, and the loan amount. Sources indicate that the Egyptian General Authority for Supply Commodities (GASC) is bargaining for a price that might be lower than the unofficial minimum price established by the Russian government, estimated to be $270 per ton upon delivery at the ship in the tender.
However, traders have expressed reservations about the practicality of this deal, citing logistical complexities in shipping Wheat from Kazakhstan and the necessity for land-based transportation through other nations. So, supplying Wheat from Kazakhstan is difficult from a logistics point of view.
GASC bought about 480,000 metric tons of Russian Wheat from the trading firm Solaris in a private deal at relatively low prices. Also, GASC had privately bought one cargo of Bulgarian Wheat at $270 per ton in late August, and the state company has recently been lured by Romanian and French Wheat that is cheaper than Russian Wheat.
As per AgFlow data, Egypt imported 11.5 million tons of Wheat in Jan – Sep 2023. The key suppliers were Russia (9.5 million tons), Ukraine (1.5 million tons), Romania (0.5 million tons), Australia (0.15 million tons), the US (83,765 tons), and Uruguay (64,001 tons). The average volume of shipments was 234,658 tons.
In January, Safaga Port in eastern Egypt received 63,000 tons of Russian Wheat aboard the dry cargo ship PAREA, according to the Red Sea Port Authority media center. Egypt had shifted towards direct purchases instead of tenders since the Russian invasion of Ukraine disrupted global Wheat markets last year.
Officials said direct purchases have helped it negotiate better prices at times of uncertainty. Many of the country’s recent Wheat purchases have reportedly been made with loans from the International Islamic Trade Finance Corporation and the World Bank.
Wheat Price Trends
Argentina quoted Egypt the highest CFR price, $379 on average, in Jan – Oct 2023. The following suppliers were Canada ($363), the US ($354), and Brazil ($348). Romania offered a relatively lower CFR price of $271 compared with European suppliers.
For selected countries, trends of CFR price showed a similar downward situation in Jan – Oct 2023. The price was the highest in January and the lowest in October. Russian price was near German price and dropped slightly during June – August. Ukraine was offering a lower CFR price to Egypt. But, Egypt selected Russia as its top supplier.
The monthly average price for normal Wheat in Egypt amounted to 22.05 Egyptian pounds (0.71 U.S. dollars) per kilogram as of May 2023. During the period reviewed, the price was the highest ever recorded and increased slightly compared to the previous month, registering a growth of almost 1.9 percent.
In mid-January, Egypt raised the price of local Wheat procurement for the new harvest season, which started in April 2023, by 42 percent to hit EGP 1,250 per ardeb (1 ardeb=150 kg), up from EGP 880. In early 2023, Egypt’s Prime Minister Mostafa Madbouly said the cost of Wheat subsidies would reach EGP 95 billion by the end of the year, up from EGP 38 billion.
Egypt and the UAE Cooperation for Wheat Financing
In mid-August, Egypt’s Ministry of International Cooperation and Finance and the General Authority for Supply Commodities (GASC) signed with the Abu Dhabi Exports Office (ADEX), affiliated with the Abu Dhabi Fund for Development, a financing program agreement. The roundabout is worth $100m for five years, with a total of $500m, with the aim of financing Wheat imports. The agreement is the first of its kind with the ADEX.
Minister of International Cooperation Rania Al-Mashat explained that the new agreement reflects the keenness to enhance economic integration and advance joint development efforts, explaining that through revolving financing, the needs of the local market for Wheat will be met in light of the procedures that are being taken by the Egyptian state to enhance food security through soft development funds.
The UAE supported the inauguration of 25 silos in 17 governorates to increase the storage capacity of Wheat by 1.5 million tons, adding that the coming period will witness discussions on more future areas of cooperation in light of Egypt’s development priorities.
Mohamed Saif Al Suwaidi, Director General of the Abu Dhabi Fund for Development, noted: “The partnership between the Abu Dhabi Office for Exports, the General Authority for Supply Commodities, and Al Dahra Agricultural Company will contribute to strengthening the strategic stock of Grain and providing sufficient quantities of crops to meet the Egyptian market’s need for these essential commodities. The Abu Dhabi Office for Exports will work through this agreement to provide credit facilities.
With over 160,000 hectares of agricultural land in Egypt, Romania, Serbia, the United States, and others, Al Dahra specializes in cultivating, producing, and trading nearly 3 million tons of animal feed and up to 3 million tons of essential food commodities through end-to-end supply chain management. Al Dahra farms 28,000 hectares in Egypt, which helps sustain the country’s food security by producing staple crops.
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