How Did the Egyptian Wheat Market Cope with the War in Ukraine?
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Egyptian Wheat Production Barely Covers 43% of Domestic Demand
With a population of 107 Million (2022), Egypt’s Wheat consumption is one of the largest in the world, reaching 20.5 Mmt in MY 2021/2022. However, production barely covers 9 Mmt in the same MY (~ 43% of the market demand). Between MY 2019/2020 and 2021/2022, Egypt increased Wheat harvested area by 30 kha. Meanwhile, domestic consumption increased by 200 kmt. In 2022, due to the Russia/Ukraine war – the two leading suppliers for the Egyptian Wheat market – Egypt struggled to fulfill its local demand. Thus, in MY 2022/2023, the country increased its harvested area by 130 kha YoY, and the USDA estimates production to increase by 800 kmt and cover (~ 48%) of domestic consumption. Will Egypt continue to expand its product to reach a higher level self–sufficiency in the coming years?
Figure 1: Egypt Wheat Production, Domestic Consumption and Harvested Area (MY 2018/2019 – 2022/2023)
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Egypt’s 2022 Wheat Imports Decreased Despite Grain Corridor Agreement
Egypt’s Wheat imports decreased by 509 kmt YoY in MY 2021/2022, despite the domestic demand increasing by 100 kmt YoY and production declining by 0.1 Mmt YoY. This is due to Russia and Ukraine limiting their exports since the war started in late Feb 2022. Thus, Egypt has struggled to reach the needed volumes in Q1 and Q2 2022. With the grain corridor agreement in July 2022, Egypt’s Wheat imports increased in August 2022 by 20 kmt YoY but dropped YoY in the following months. Overall, Egypt’s Wheat imports decreased by 1.8 Mmt YoY between Jul and Nov 2022. As the Russia/Ukraine war persists, what are the alternative suppliers for Egypt’s Wheat imports?
Figure 2: Egypt Wheat Imports (MY 2019/2020 – Jul-Nov 2022/2023)
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Read also: Egypt Corn Imports Decreasing In H1 2022
Romania Remains the Main Alternative for Wheat Imports to Egypt
In MY 2021/2022, Russia remained the leading Wheat supplier for Egypt. However, with limited exports through quotas, imports from Russia decreased by 2.7 Mmt YoY. On the other hand, imports from Ukraine increased by 1.3 Mmt YoY between Jul 2021 and Feb 2022, then decreased by 0.6 Mmt YoY between Mar and Jun 2022, which explains a 0.7 Mmt increase YoY in MY 2021/2022 despite the war. Meanwhile, in 2022, Egypt’s Wheat imports from Romania increased by 2.2 Mmt YoY between Mar and Nov 2022, Germany by 108 kmt, and France by 429 kmt. However, between Jul and Nov MY 2022/2023, Russia managed to supply Egypt with 1.2 Mmt more Wheat YoY. Overall, Russia, Ukraine, and Romania are the major suppliers of Egypt’s Wheat Market in 2022; thus, how did the price difference between these countries occur?
Figure 3: Egypt Top Wheat Suppliers (MY 2020/2021 & 2021/2022)
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Ukrainian Wheat CFR Indications Are Cheaper Despite the War
Egypt sourced Wheat at similar prices from Russia, Ukraine, and Romania over the past two years. On February 2022, the war in Ukraine reversed the situation. A limited supply of Russia’s Wheat exports led its CFR indications to peak at USD 490 /mt in Mar, USD 136 /mt higher YoY on average. Similarly, Romanian Wheat CFR indications peaked at USD 495 / mt in May, USD 153 /mt higher YoY on average. Meanwhile, Ukrainian prices peaked at USD 441/mt in March when the supply was minimal. However, since Jul 2022, the grain corridor agreement led Ukraine to resume its Wheat exports to Egypt at lower prices than Russia and Romania, reaching a minimum of USD 202 /mt in August, only USD 5 /mt higher YoY.
Figure 4: Egypt CFR Indication Averages for Wheat Imports From Russia, Ukraine and Romania (Jul 2020 – Nov 2022)
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In a Nutshell
Egypt’s Wheat Production barely covers 43% of domestic needs. Thus, Egypt’s Wheat market relies on imports from Russia and Ukraine.
Since the war began in Ukraine in Feb 2022, Russia has limited its exports, and Ukraine has struggled to ship its Wheat. Consequently, Egpyt had to open to new exporting markets, mainly Romania, which has increased its Wheat exports to Egypt by 2.3 Mmt YoY between Mar and Nov 2022. Yet Russia and Ukraine remain the major suppliers, particularly after both countries signed the grain corridor agreement.
Nevertheless, as the war persists, Egpyt has increased its Wheat planted land for the MY 2022/2023, and the USDA estimates production to reach 9,8 Mmt. Yet. Egypt will need to continue imports because domestic demand will remain 10.8 Mmt higher than local production.
