Posted on August, 29, 2024 at 05:47 pm
Egypt's biggest ever wheat tender, nearly 20 times its usual size, stemmed from food security concerns sparked by an intelligence briefing given to President Abdel Fattah al-Sisi, according to three security and government sources.
Egypt, one of the world's biggest wheat importers, relies on the grain to produce subsidised bread for tens of millions of Egyptians. Successive governments have kept its price stable for decades to avoid public unrest, but in June, Sisi’s government hiked the price by 300%.
Sisi's role in the tender launched earlier this month - which sought 3.8 million metric tons of wheat, but delivered just 7% of those volumes - has not been previously reported. His office did not respond to a request for comment.
Egypt has suffered several financial shocks in recent years including from Russia's invasion of Ukraine in 2022 which disrupted supply chains and caused global wheat prices to rise to a peak at more than $500 a metric ton.
With wheat prices trading today at a near four-year low of around $200 a ton due to abundant global supply, Sisi and his government have sought to lock in cheap imports, the sources said.
Sisi took the decision together with Prime Minister Mostafa Madbouly and newly appointed Supply Minister Sherif Farouk, the sources said. Sisi's personal involvement was highly unusual, as decisions about tenders are usually taken by the supply ministry.
The size of the tender was also unusual. The 3.8 million tons sought by Egypt, worth around $850 million, compares to the more regular size of about 200,000 tons and represents more than half its annual wheat imports.
Sisi took the decision after a regular quarterly briefing from his intelligence services in July that highlighted the risks of escalating tensions in the Middle East and in exporting countries such as Russia and Ukraine, the sources said.
As Egypt announced the tender, Ukrainian troops entered Russian territory in the Kursk region, highlighting growing risks to supplies from some of the world's biggest exporters.
Russia is the largest source of wheat to Egypt, and Ukraine is also an important supplier.
The tender was an attempt to take advantage of low prices and buy as much as possible, Hossam El Garahy, vice chairman of state buyer the General Authority for Supply Commodities, told Reuters.
He cited low prices achieved at the previous tender in July as being one of the reasons behind the decision to hold a new, bigger tender in August.
Sisi has been trying to overcome one of the biggest economic crises since he came to power a decade ago.
Over the past two years, the North African country has been struggling with an acute foreign currency shortage, rising debt, record-high inflation and rolling blackouts that have led to growing frustrations among Egyptians.
Earlier this year it had to rely on the support of friendly Gulf countries as well as an $8 billion financial package from the International Monetary Fund to ease its financial problems.
The wheat tender proved however too ambitious, as Egypt bought only 7% of its target volumes. Sellers asked for high wheat prices as Egypt sought a big payment delay of up to nine months.
GASC has also started direct talks with suppliers such as Russia as it tries to find out if it can achieve better prices and terms outside traditional tenders, traders told Reuters.
"Egypt right now is trying all ways to lock cheaper prices, whether it is through the tender, direct deals or adding new import origins," said Hesham Soliman, a Cairo-based grains trader.
"However, this particular tender revealed the quantity Egypt needed, and the suppliers took advantage of that as we saw with the prices."
Prime Minister Madbouly said on Thursday that strategic reserves of wheat are now sufficient for more than six months of consumption but the country can tap the market for more when prices are low.
Source: Yahooo News