Egypt, the world’s largest wheat buyer, expects prices to stabilize in the coming months after recent highs driven by uncertainty during the coronavirus pandemic and recent protective measures such as the Russian export quota.
The North African country is one of the main buyers of Russian grain and has looked to bolster its strategic reserves of wheat, which the supply ministry said on Sunday were sufficient to cover five and a half months of consumption.
“We’ve seen highs over the last three months which, in my opinion, are not caused by what we used to say before, such as weak harvests or climate factors, it’s all coming from uncertainty,” Egyptian Supply Minister Ali Moselhy said.
The state grains buyer, the General Authority for Supply Commodities (GASC) raised purchases by almost 40% at the start of its buying season with the supply ministry instructed to keep six months of strategic reserves.
The stocks helped Egypt offset sharp increases in the price of wheat amid high global demand and a looming export tax and quota on Russian wheat, of which Cairo is a main consumer, but GASC purchases slowed slightly in the last quarter of 2020.
Russia, one of the world’s largest wheat exporters, will introduce a quota for overseas shipments of wheat, rye, barley and corn (maize) limiting exports to 17.5 million tonnes for the period Feb. 15-June 30 as well as a wheat export tax of 25 euros ($30.40) per tonne within that period.
The planned levy has triggered volatility in international prices as the market has tried to figure out whether this could curb exports or boost them.
Moselhy said that as vaccines are rolled out and global health conditions improve, the market will stabilize.
“The stocks entering the market are strong this year and at the same time production was not affected so there is no logical reason for prices to keep increasing,” Moselhy added.
Egyptian President Abdel Fattah el-Sisi ordered authorities to bolster strategic reserves in March as lockdowns imposed to contain the pandemic sparked concerns over food security and disrupted supply chains.
Moselhy said that Egypt’s new commodities exchange to trade rice, vegetable oils and sugar, will participate in the incoming local wheat harvest season starting mid-April.
He said that the exchange will be responsible for clearance, while the government will set the procurement price at which it will purchase wheat from farmers for the state’s food subsidy program.
