(EGYPT) – Egypt’s state grains buyer has secured a substantial purchase of approximately 480,000 metric tons of Russian wheat in a private deal.
This transaction was achieved at a price of around $270 per metric ton on a cost and freight basis (C&F), marking a significant move towards direct purchases instead of traditional tenders for one of the world’s largest wheat importers.
The shift towards direct purchases comes as a response to disruptions caused by the conflict in Ukraine, prompting the General Authority for Supply Commodities (GASC) in Egypt to explore alternative procurement methods.
GASC secures russian wheat deal below unofficial price floor
GASC managed to negotiate a price lower than an unofficial floor established by the Russian government to regulate domestic wheat prices.
While this price floor is not legally binding, suppliers are generally expected to adhere to guidelines from Russia’s agriculture ministry.
However, the Russian wheat market currently lacks clarity regarding the precise minimum floor price, as different thresholds apply to private sales, public tenders, various months from September to December, and different grades of wheat.
In the recent tender, Russian suppliers submitted bids at the price floor of $270 per metric ton on a free-on-board (FOB) basis, with C&F prices ranging from $286.25 to $291 per metric ton.
This had previously impacted the competitiveness of Russian wheat, leading GASC to opt for cheaper Romanian and French wheat.
Egypt’s strategy of direct purchases from suppliers has enabled it to negotiate favorable prices amid economic challenges stemming from the Ukraine conflict, which disrupted wheat exports and created foreign currency shortages.
Consequently, Egypt has been deferring wheat payments, seeking alternative financial solutions such as a $500 million loan agreement with the Abu Dhabi Exports Office (ADEX) to purchase imported wheat.