Egypt Procures Approximately 500,000 Tons of Russian Wheat in Private Agreement

Egypt's major grain procurement agency, the General Authority for Supply Commodities (GASC), successfully acquired approximately 480,000 metric tons of Russian wheat through a private transaction, as reported by four traders. This achievement marked a departure from the traditional tender process and allowed Egypt to secure lower prices than those typically offered.

As one of the world's largest importers of wheat, Egypt had initiated a shift toward direct purchases rather than relying on tenders. This change was motivated by disruptions in wheat procurement caused by the conflict in Ukraine.

The acquisition, carried out in collaboration with trading firm Solaris, involved the procurement of Russian wheat at a cost of approximately $270 per metric ton on a cost and freight (C&F) basis. Traders noted that this price may potentially fall below an unofficial floor established by the Russian government to regulate domestic wheat prices.

Other Russian wheat suppliers had submitted offers at a free-on-board (FOB) price of $265 per metric ton on the same day, believing it to be the established price floor. Additionally, their C&F prices exceeded $270 per ton.

It's important to note that the price floor is not legally binding, but suppliers typically adhere to instructions from Russia's agriculture ministry. However, there is some ambiguity in the market regarding the specific minimum floor price.

Traders have indicated that distinct minimum prices apply to private sales and public tenders, as well as variations in pricing for sales during different months from September to December. Furthermore, discounts are available for lower-protein wheat grades.

During a recent tender, all Russian suppliers had submitted bids at a price floor of $270 per metric ton on an FOB basis. The C&F prices ranged from $286.25 to $291 per metric ton. Traders had previously voiced concerns that this pricing structure had impacted the competitiveness of Russian wheat, leading GASC to opt for cheaper Romanian and French wheat instead.

In addition to the Russian wheat purchase, GASC privately procured a cargo of Bulgarian wheat at a price of $270 per ton C&F.

Egypt's decision to explore private transactions stems from the disruptions caused by the conflict in Ukraine, which affected the country's wheat exports. The move toward direct procurement allowed Egypt to negotiate more favorable prices during periods of uncertainty.

Egypt has been grappling with a foreign currency shortage, exacerbated by the economic shock resulting from the Ukraine war. Consequently, the country began deferring payments for wheat.

To address these challenges, the Egyptian government recently inked a $500 million loan agreement with the Abu Dhabi Exports Office (ADEX). This agreement is intended to facilitate the purchase of imported wheat from the UAE-based agribusiness Al Dahra, offering a potential solution to Egypt's wheat supply concerns.