September 6, 2022

 

Egypt switches to direct deals for wheat purchases

 

 

Traders said Egypt is in discussions to purchase wheat in direct deals instead of open tenders, a system that the Egyptian government said allows for more attractive prices following the conflict the Ukraine that has disrupted grain markets, Reuters reported.

 

The General Authority for Supply Commodities (GASC), Egypt's state grain purchaser, met privately with at least three suppliers, traders said.

 

The traders said 120,000 tonnes of Russian wheat were thought to have been purchased directly by Egypt.

 

One of the biggest wheat importers in the world, Egypt, has not published any international purchasing tenders since cancelling one in the middle of July.

 

Instead, the nation has chosen to purchase roughly 1.5 million tonnes of wheat through private direct negotiations with international businesses.

 

Following Russia's invasion of Ukraine in February, which disrupted grain markets and raised doubts about exports via the Black Sea, Egypt's government has worked to diversify both the sources of its wheat supplies and its purchasing options.

 

In an effort to increase its wheat reserves, the cabinet approved purchases of supplies of wheat from around the world in May through direct offers from businesses or governments sent to its state grains buyer GASC. View More

 

Among them is an unfulfilled contract to buy wheat from India.

 

At a news conference, Supply Minister Ali Moselhy said they can obtain better prices and conditions compared to when there are global tenders.

 

According to him, private discussions enable price negotiations to last days as opposed to just a few hours. Price trends would not affect whether the government used tenders or direct talks, the official said, adding that there was no difference when the markets were stable.

 

Mohammed El Gammal, a grains consultant for the United Nations Food and Agriculture Organization based in Cairo, said direct deals also give the government more latitude to purchase in smaller quantities.

 

Some traders are concerned about the shift to direct purchases. The supply ministry can request or accept bids at any time, unlike a tender where bids are submitted and announced on the same day. It also withholds offer information like prices and suppliers.

 

One trader said suppliers can offer that lower price to GASC at any time prices are falling, without having to wait for the tender day.

 

A second trader claimed that having direct discussions could give the government more negotiating power and that it might be trying to gauge market prices or obtain lower prices by hiding the fact that it is a potential buyer.

 

A third trader said they still in crisis mode despite having secured a sizeable amount of forward and spot purchases.

 

-      Reuters