GULF – Egypt is in its latest round of talks to buy wheat by direct purchase, traders said, a system the government has said can provide more attractive prices since the Ukraine war disrupted grain markets.
Egypt’s state grains buyer, the General Authority for Supply Commodities (GASC), held private talks with at least three suppliers on Wednesday, with traders saying that no purchase had been made so far.
It was unclear if GASC would eventually make a purchase or if it was just assessing prices.
Egypt, one of the world’s biggest wheat importers, has not issued international purchasing tenders since it cancelled one in mid-July.
The country has opted instead to buy around 1.5 million tonnes of wheat through private direct talks with global companies.
Egypt’s government has sought to diversify both origins for wheat supplies and purchasing options following Russia’s invasion of Ukraine in February, which disrupted grain markets and cast uncertainty over exports via the Black Sea.
In May, the cabinet approved purchases of global wheat supplies through direct offers from companies or governments sent to its state grains buyer GASC, in an effort to boost its wheat reserves. read more
Those include an outstanding agreement to purchase wheat from India.
Egypt’s current wheat reserves stand at around seven months, according to the supply ministry.
In times of uncertainty “we can obtain better prices and conditions compared to when there are global tenders,” Supply Minister Ali Moselhy told Reuters at a news conference on Wednesday.
Private talks allow for price negotiations to go on for days instead of hours, he said. “When the markets are stable, there’s no difference,” adding that price trends would not determine whether the government used tenders or direct talks.
Direct deals also allow the government more flexibility to buy in smaller quantities, said Mohammed El Gammal, a Cairo-based grains consultant for the U.N. Food and Agriculture Organisation. read more
The shift to direct purchases has unsettled some traders. Unlike a tender where bids are submitted and announced on the same day, the supply ministry can request or accept bids at any point, and it does not reveal offer details such as prices and suppliers.
“Any time prices are falling suppliers can offer that lower price to GASC, without having to wait for the tender day,” one trader said.
A second trader said direct talks might give the government more leverage in negotiations, and that it might be trying to gauge market prices or get lower prices by not showing its hand as a buyer.
“They’re still in crisis mode despite having secured a significant amount of forward and spot purchases,” said a third trader.
courtesy- Reuters
