Posted on January, 17, 2023 at 09:11 am
Egypt's state grain board will hold its first-ever tender for corn on Jan. 19, as the government steps in to replenish the country's depleted feed grain stocks.
The General Authority for Supply Commodities (GASC) is the largest buyer in global wheat market, where it procures supplies to provide most of Egypt's 109 million people with subsidized baladi and fino bread, but feed grain imports have typically been left to private players.
A representative from GASC confirmed the corn would be used for feed, but said it wasn't yet clear how the grain would be distributed within Egypt. The country usually imports more than 1 million mt/month of corn, but took just 924,000 mt in the last three months of 2022. Egypt imported 3.63 million mt in the same period a year earlier. This shortage has resulted in a shrinkage of the poultry stock and fears of rising prices.
Egypt's private players have struggled to take delivery of corn since September 2022 because it became hard for them to pay when the government tightened restrictions on foreign exchange.
"There are no dollars coming in," said Emad Hanna, the owner of Prime Grains Group, which trades wheat, corn and sunflower meal. "Suppliers are selling volumes to Egypt and not getting any money."
The decline is largely because Egyptian importers were unable to get their banks to provide letters of credit for dollar payments.
"[In autumn] there was a million metric tons of grain that [sellers] couldn't be released," said Ali Ramadan, the head of Egyptian Australian Co. For Trading. He added that the buyer of one cargo owed demurrage fees for two months because his bank wasn't ready to pay when the vessel arrived.
"In order to export to Egypt at the moment, [private sector] suppliers have to agree to SMAs [stock monitoring agreements]," said Ramadan, referring to financing agreements where suppliers discharge their cargoes into supervised warehouses and receive payments in installments as the goods are released.
Egypt's foreign exchange market is closely managed by the central bank and there are currently restrictions on traders who wish to buy foreign currency with Egyptian pounds, pushing many of those traders into a so-called "parallel market," which is unofficial and trades at a premium to the official rate.
Egypt's Jan. 19 corn tender will be financed by the International Islamic Trade Finance Corp. and it comes a week after the World Bank provided financing for GASC to purchase 120,000 mt of milling wheat.
Source: S&P Global