December 29, 2014

Egypt wheat supply from Russia imperiled by grain exports suspension

Egypt, the world's largest wheat importer, may fail to get its supply of wheat from Russia, which has reportedly stopped grain exports to protect domestic supply. 

The head of the influential Russian farm lobby group Grain Union, Arkady Zlochevsky, said that since December 18 "not a single vessel, which had been due to sail under contracts, has left," according to Reuters.

"All loadings are suspended, there is only a need to legally formalize it", Zlochevsky added.

Zlochevsky said about 3 million tonnes of grain due for export until the end of January were stuck.

The Reuters report said Russia, which is tackling a financial crisis linked to plunging oil prices and Western sanctions, imposed informal grain export controls and limits on railroad loadings this month.

Zlochevsky also said officials planned to impose "prohibitive" duty on grain exports, which would be a repeat of the duty imposed on wheat exports in 2008.

In 2010, Russia also imposed a ban on the export of wheat after it suffered from drought. The ban partly triggered social unrest and a revolution in Egypt after Russia failed to supply over 500,000 tonnes of wheat to Egypt and global prices rose, damaging Egypt's bread subsidy program.

Besides Egypt, Russia's main wheat buyers include Turkey and Iran.

Mamdouh Abdel Fattah, vice chairman of Egypt's state grain buyer General Authority for Supply Commodities has insisted that trading companies were obliged to abide by their contracts to ship Russian wheat to Egypt.

Zlochevsky said shipments would only be possible if and when the government makes an exception for Egypt.