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Egypt Says Russian-Ukrainian Tensions Increase Wheat Market Volatility

A wheat farmer in Egypt. (Reuters file photo)
A wheat farmer in Egypt. (Reuters file photo)
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Egypt Says Russian-Ukrainian Tensions Increase Wheat Market Volatility

A wheat farmer in Egypt. (Reuters file photo)
A wheat farmer in Egypt. (Reuters file photo)

Egypt is working on several preventive measures to hedge the volatility of the wheat market amid the current tensions between Russia and Ukraine, the two largest wheat exporters in the world.

Minister of Supply and Internal Trade Ali al-Moselhi warned that the tensions are increasing the uncertainty in the market.

The official Middle East News Agency quoted Moselhi saying that the government has adopted several measures to secure wheat reserves and diversify its import origins.

He stated that the supply season for the strategic crop will start in April, adding that there would be a surplus and the strategic reserve will even last until November.

Egypt's wheat strategic reserve is safe and will suffice for more than five months, assured the minister.

"A finance ministry committee has been formed to study hedging policies, and discussions will be completed at the beginning of next month so we can decide if we should go forward with it or not," he explained.

A potential invasion of Ukraine by neighboring Russia could lead to interruptions to the flow of grain out of the Black Sea region, adding upward pressure on prices.

Russia has repeatedly denied it is planning such an invasion.

Data from two regional traders show that Egypt, one of the world's top wheat importers, bought about 50 percent of its wheat from Russia and about 30 percent from Ukraine last year.

The General Authority for Supply Commodities (GASC), the state's grains buyer, has diversified wheat sources and recently adopted Latvian wheat as a new import origin in November.

The government is also considering overhauling its decades-old food subsidy program, which provides a daily bread allowance to nearly two-thirds of the population.

According to the Finance Ministry, the program costs the government about $5.5 billion, with higher wheat prices expected to add $763 million to the 2021/2022 budget.

In December, Prime Minister Mostafa Madbouly said Egypt is "no longer isolated from global inflationary pressures," adding that it was time to "revise" the program.

Abbas al-Shenawy, an agriculture ministry official, had previously announced that Egypt planted 3.62 million feddans of wheat for the current 2022 season.

He explained that the cultivated area might increase slightly during the coming period, but will not exceed 3.7 million feddans.

The regular wheat planting season began in mid-November and ended in January.

Egypt imported 5.5 million tons of wheat in 2021, while the total domestic supply amounted to 3.5 million tons.

Last November, the Egyptian cabinet approved a procurement price of 820 Egyptian pounds per ardeb for wheat bought by the government from local farmers ahead of planting for the new season.

The new procurement price at 23.5 percent purity wheat was approved after a complete study by the agriculture and supply ministries, based on global prices and local costs per feddan unit of land.

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World Breathes Sigh of Relief as Trump Spares Fed, IMF

US President Donald Trump speaks to members of press onboard Air Force One on a flight to Fiumicino Airport near Rome to attend the funeral of Pope Francis, April 25, 2025. (Reuters)
US President Donald Trump speaks to members of press onboard Air Force One on a flight to Fiumicino Airport near Rome to attend the funeral of Pope Francis, April 25, 2025. (Reuters)
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World Breathes Sigh of Relief as Trump Spares Fed, IMF

US President Donald Trump speaks to members of press onboard Air Force One on a flight to Fiumicino Airport near Rome to attend the funeral of Pope Francis, April 25, 2025. (Reuters)
US President Donald Trump speaks to members of press onboard Air Force One on a flight to Fiumicino Airport near Rome to attend the funeral of Pope Francis, April 25, 2025. (Reuters)

Global policymakers gathering in Washington this week breathed a collective sigh of relief that the US-centric economic order that prevailed for the past 80 years was not collapsing just yet despite Donald Trump's inward-looking approach.

The Spring Meetings of the International Monetary Fund and the World Bank were dominated by trade talks, which also brought some de-escalatory statements from Washington about its relations with China.

But some deeper questions hovered over central bankers and finance ministers after Trump's attacks on international institutions and the Federal Reserve: can we still count on the US dollar as the world's safe haven and on the two lenders that have supported the international economic system since the end of World War Two?

Conversations with dozens of policymakers from all over the world revealed generalized relief at Trump’s scaling back his threats to fire Fed Chair Jerome Powell, the guardian of the dollar’s international status whom he had previously described as a "major loser".

And many also saw a silver lining in US Treasury Secretary Scott Bessent’s call to reshape the IMF and World Bank according to Trump's priorities because it implied that the United States was not about to pull out of the two lenders that it helped create at the Bretton Woods conference of 1944.

"This week was one of cautious relief," Austria's central bank governor Robert Holzmann said. "There was a turn (in the US administration's stance) but I fret this may not be the last. I keep my reservations."

A politicization of the Fed and, to a lesser extent, the hollowing out of the IMF and World Bank are almost too much to fathom for most officials.

Deprived of a lender of last resort, some $25 trillion of bonds and loans issued abroad would be called into question.

NO ALTERNATIVE

At the heart of policymakers' concerns is that there is no ready alternative to the United States as the world's financial hegemon - a situation that economists know as the Kindleberger Trap after renowned historian Charles Kindleberger.

To be sure, the euro, a distant-second reserve currency, is gaining popularity in light of the European Union's newly found status as an island of relative stability.

But policymakers who spoke to Reuters were adamant that the European single currency was not ready yet to dethrone the dollar and could at best hope to add a little to its 20% share of the world's reserves.

Of the 20 countries that share the euro only Germany has the credit rating and the size that investors demand from a safe haven.

Some other members are highly indebted and prone to bouts of political and financial turmoil - most recently in France last year - which raise lingering questions about the bloc's long-term viability.

And the euro zone's geographical proximity to Russia - particularly the three Baltic countries that were once part of the Soviet Union - cast an even more sinister shadow.

With Japan now too small and China's heavily managed currency in an even worse position, this left no alternative to the dollar system underpinned by the Fed and the two Bretton Woods institutions.

In fact, the IMF and the World Bank could scarcely survive if their largest shareholder, the United States, pulled out, officials said.

"The US is absolutely crucial for multilateral institutions," Polish Finance Minister Andrzej Domanski told Reuters. "We're happy they remain."

Still, few expected to go back to the old status quo and thorny issues were likely to await, such as widespread dependence on US firms for a number of key services from credit cards to satellites.

But some observers argued that the market turmoil of the past few weeks, which saw US bonds, shares and the currency sell off sharply, might have been a shot in the arm as it forced a change of tack by the administration.

"When President Trump talked about firing Jay Powell, the fact that markets reacted so vigorously to that ended up being a disciplining reality just reminding the administration that, if you cross that line, it could have some very severe implications," said Nathan Sheets, global chief economist at Citi.