Strong start to the wheat season

Ahmed Abdel-Hafez, Tuesday 23 Apr 2024

The easing dollar crisis is paving the way for a promising wheat season, reports Ahmed Abdel-Hafez

Strong start to the wheat season

 

The wheat harvest season, extending from mid-April to August, has begun.

However, the actual supply commences in the second week of May, when wheat is harvested from agricultural land in the Nile Valley. Wheat cultivated in desert areas in Upper Egypt matures more rapidly due to the higher temperatures.

This year’s wheat supply coincides with a decline in the local prices of wheat and unsubsidised bread, part of a broader trend of the declining prices of food commodities and ranging from 15 to 30 per cent compared to January.

The price drops are influenced by the availability of the dollar in the banking sector and its reduced price in the parallel market. This has led to the release of the commodities backlog in the ports, increasing supply and thus putting a cap on prices.

This year, the Ministry of Supply is receiving wheat from farmers at a higher price, LE13,300 per ardeb (one ardeb = 150 kg), while imported wheat is priced at LE12,300 per ardeb.

Hussein Abu Saddam, head of the Farmers Syndicate, views this price as fair and serves as an incentive for farmers to supply larger quantities of wheat.

The government received significant quantities of wheat during the first days of the wheat supply, Abu Saddam said, lauding state efforts to increase the number of collection points to over 400.

He also referred to directives to expedite the disbursement of payment to farmers within 48 hours of supply.

Abu Saddam expects that wheat supplied this year will increase by one million tons compared to last year — the peak of the dollar crisis — when farmers supplied just over three million tons.

Hussein Al-Boudi, head of the Cereals Industry Chamber of the Federation of Egyptian Industries, concurred that the recent measures by the government may increase the quantities of wheat delivered to the Ministry of Supply this season. This could significantly alleviate the strain on the dollar in 2024, he added.

The government’s successful efforts to bring down the dollar price in the parallel market and facilitate importers’ access to documentary credits through the banks have contributed to driving down the price of flour from LE19,000 to LE13,000 per ton.

Moreover, the decrease in global wheat prices has led to lower flour prices for consumers, leading to a reduction in bread prices.

The Central Administration for Agricultural Quarantine said last week that it has ended seizure procedures on a 63,000-ton shipment of Russian wheat that had been stranded in a Russian port for three weeks.

The Supply Commodities Authority also announced its latest tender on 15 April to import wheat, with the supply scheduled between 20 and 30 May.

There had earlier been a tender to procure 180,000 tons of Ukrainian wheat, scheduled for supply between 10 and 25 April and priced at $255 per ton inclusive of shipping costs.

Egypt is the world’s largest buyer of wheat, with the government and private sector both purchasing 10 to 12 million tons annually, in addition to the three million tons supplied by local farmers.

Nader Noureldin, an expert with the UN Food and Agriculture Organisation (FAO) and a former advisor to the Ministry of Supply, believes that while “the increase in procurement prices will lead to a surge in the volume of wheat delivered, this surge will not be huge.”

Many private-sector entities are still competing with the government to purchase homegrown wheat, he said, explaining that for private buyers farmers do not shoulder the burden of shipping wheat as is the case when they sell it to the government.

There is also the advantage of immediate cash payment upon supply in the case of selling to the private sector.

Some private-sector companies also favour homegrown wheat because it costs less than imported wheat, which comes with additional shipping expenses.

Some resort to local wheat as a precautionary measure to ensure a reasonable stockpile to navigate potential disruptions in global supply operations amid prevailing economic uncertainties, Noureldin said.

Global wheat prices rose to over $300 per ton in 2023 before declining from early 2024 to near pre-Covid-19 levels, he added. However, the scarcity of the dollar and its elevated price in the parallel market have prevented the reductions from reverberating in the local market in Egypt.

Noureldin noted that the Ministry of Supply provides subsidised bread to 60 million people, while the private sector sells unsubsidised bread to 45 million. The price of unsubsidised bread has gone down over the past few days due to the depreciation of the dollar against the pound from LE70 to LE48.


* A version of this article appears in print in the 25 April, 2024 edition of Al-Ahram Weekly

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