Egypt snapping up Black Sea wheat…

By Peter McMeekin

Egypt’s state grains buyer, the General Authority for Supply Commodities (GASC) was active in the global wheat market again last week snapping up two parcels of Black Sea wheat totalling 600,000 metric tonne by international tender, with payment on 270-day letter of credit (LC).

On Tuesday GASC announced that it had purchased three 60,000 metric tonne cargoes for shipment between January 26 and February 4 after offers were received from Bulgarian, French, Romanian, Russian and Ukrainian exporters. The purchase included two Russian cargoes at US$255.00 per metric tonne free on board (FOB) plus freight of US$23.25/MT for a landed cost and freight (C&F) price of US$278.25/MT. The third cargo was Ukrainian origin at US$249.90/MT FOB plus freight of US$19.10/MT for a C&F price of US$269.00/MT.

The tender received a total offer volume of more than two million metric tonne across three shipment periods with prices sought from each participant for payment by both sight LC and 270-day LC. The January 5-15 slot attracted nine offers totalling 515,000MT, the cheapest being Russian origin at US$250.00/MT and US$263.00/MT for the respective payment options. The second tender period was January 16-25, with ten offers totalling 580,000MT submitted with the lowest sight LC price of US$250.00/MT and the best 270-day LC price of US$260.00/MT. GASC only made purchases in the final period, which attracted 17 offers totalling 1MMT with the sight LC price around a US$5.00/MT discount to the accepted offers.

No sooner had the ink dried on Tuesday's purchases, that GASC announced another tender with offers invited by midday on Thursday, December 7, for two shipping periods and the same two payment options. The first shipping period was January 10-20 with six offers received, five Russian and one French amounting to 345,000MT. A total of 210,000MT was booked from Russian exporter Grain Flower in four bottoms at US$265.00/MT FOB for payment on 270-day LC. Freight was reported at an average of US$21.80/MT for an average C&F price of US$286.80/MT.

The second shipping window of January 21-31 attracted seven offers, four Russian, two French and one Romanian, for a total of 415,000MT. GASC went for more of the same, booking another 210,000MT of Russian wheat in four cargoes from Grain Flower at the same value as the earlier shipment period. The most intriguing thing about last week's second tender is the Russian prices were up US$10.00 on a FOB basis in just three days.

Last week’s international wheat tender activity was the first in some time for GASC after it had resorted to direct purchases via private negotiations over the past three months, with Russia dominating the dialogue. In early September GASC reportedly purchased 480,000MT of Russian wheat from trading firm Solaris at around US$270.00/MT C&F plus one cargo from Bulgaria at the same price. In the second week of October, GASC booked another eight 60,000MT cargoes from OZK, also known as United Grain Co, a Russian, state-backed trader at US$265.00 FOB. Then, late last month, another 480,000MT parcel was purchased, again from Russian exporters.

Egyptian wheat production in the 2023/24 marketing year (July to June) is forecast at 8.87MMT, down 6.63 per cent from 9.5MMT in 2022/23 after the planted area dropped by 100,000 hectares to 1.35 million hectares. The fall in the planted area is reportedly being driven by an increase in the area allocated to Egyptian clover and sugar beets.

Wheat in Egypt is generally planted in November and harvested in April of the following year. The government’s wheat procurement season traditionally commences in mid-April and continues to mid-July. However, this year, it was extended to mid-August to give farmers more time to deliver their crop to government collection centres. In the current calendar year, the government purchased almost 3.8MMT from farmers, down from around 4.2MMT in 2022.

In April this year, the government increased the domestic procurement price from 885 Egyptian pounds (EGP) per ardeb to a maximum of 1,500 EGP/ardeb, depending on purity and quality. With one ardeb equivalent to 150 kilograms, this equates to around US$324.00/MT (AUD492.00/MT). On November 2, just as this year’s planting window opened, the government announced next year’s procurement price, increasing it to a maximum of 1,600 EGP/ardeb, or US$345/MT (AUD524/MT), in a bid to arrest the wheat area decline.

Wheat consumption in the current marketing year is expected to be 20.6MMT, fractionally higher than 20.55MMT in 2022/23. With stock feed and residual use unchanged at 1.3MT, the increase is totally attributable to a rise in food seed and industrial use to 19.3MMT. The demand is being driven by a combination of domestic population growth, currently around 105 million, and migrant/refugee growth, with Egypt believed to be hosting at least nine million foreign nationals, predominantly from Iraq, Libya, Sudan, Syria and Yemen.

According to the USDA’s Foreign Agricultural Service, Egyptian wheat imports are forecast at 12MMT in the 2023/24 marketing year, up 6.9 per cent from 11.22MMT last season. The largest suppliers in 2022/23 were Russia with 8.1MMT, the European Union with 1.8 MMT, Ukraine with 856,377 MT, and Australia with 172,015 MT.
In the eight months to the end of August this year, imports by GASC accounted for 50.5 per cent of total wheat imports, with the private sector accounting for the balance. The private industry has increased its market share of wheat imports over the past five years, in line with an increase in the flour they distribute to private bakeries, cafés and patisseries producing high-quality, non-subsidised flour products.

In 2022/23, GASC imported 5.8MMT of wheat to support the government’s bread subsidy program. Approximately two-thirds of the Egyptian population are eligible for bread subsidies with beneficiaries allocated 150 loaves of bread per month. They purchase each loaf for 0.05 EGP/loaf, around half of the actual cost of production. The government has been trying to reduce the subsidy reliance but rising inflation and cost of living pressures have stymied the plan.

Call your local Grain Brokers Australia representative on 1300 946 544 to discuss your grain marketing needs.