May 14, 2004

Australia AWB Clarifies Egypt Wheat Supply Pact Report

Australian wheat exporter AWB Ltd. Thursday sought to clarify reported differences over the terms of an agreement signed with Egypt about a possible long-term supply of wheat.
 
Peter McBride, an AWB spokesman, was responding to a report Thursday in Egypt's state-controlled Al-Gomhuria newspaper that said AWB signed a long-term agreement with Egypt to supply 1 million metric tons of wheat over five to seven years.
 
Egypt's Supply and Home Trade Minister Hassan Khidr was quoted as saying the deal he signed in Australia Wednesday with AWB envisaged increasing the size of the deal to 2 million tons of wheat over the same period.
 
But Peter McBride, a spokesman for AWB, denied the report, saying AWB and the minister had signed what is known here as a "heads of agreement" document.
 
"We haven't signed a long-term trade agreement, I can guarantee you that," said McBride.
 
The heads of agreement is only looking at a possible trade agreement, he added.
 
AWB said Monday it had signed an agreement with the Egyptian government on a framework "to explore a number of mutually beneficial opportunities."
 
Possible opportunities cited by AWB included a long-term wheat supply contract, future investment in silos at Ain Sokhna Port in Egypt, a credit facility for Egyptian purchases, and increased fertilizer exports from Egypt.
 
Khidr has been in Australia since Friday with a delegation of Egyptian officials, including Mahmoud Abdelhamid, vice chairman of the main state wheat buyer, the General Authority for Supply Commodities.
 
Meanwhile, GASC's general manager in Cairo, Nomani Nomani stated he has read the minister's comments in Al-Gomhuria but could not immediately confirm the report.
 
Cairo-based traders expressed suspicion that any concrete deal has been sealed between Egypt and AWB.
 
"The (Supply and Trade) minister has to come back to Egypt from Australia looking like he has achieved something for the people," said a Cairo-based trader with an international commodities house.
 
AWB, a major global supplier, has supplied wheat to Egypt for more than 50 years and says it is positioned to export more than 2.3 million tons from the old crop mostly harvested in November and December.
 
Egypt imports between 6 million and 7 million tons of wheat a year, making it one of the world's biggest wheat importers.
 
Monday, AWB managing director Andrew Lindberg said the parties will establish a joint project team to conduct a feasibility study scheduled for completion next calendar quarter to develop the agreement.
 
Once the study is completed and benefits identified, the parties will be in a position to sign a contract to formalize the agreement late in 2004, he said.
 
"Such an agreement has the potential to lead to a long term supply arrangement for wheat between AWB and Egypt," Lindberg said.