The General Authority for Subsidised Commodities (GASC), the state grain buyer, offered 12,000 tons of Russian wheat to private mills in the first transaction on the newly launched Egyptian Mercantile Exchange (EMA) Egycomex on Sunday, according to Ibrahim Ashmawi, its CEO.

He added that the offer was almost 65 per cent oversubscribed as the mills put in orders to buy 22,000 tons.

The price per ton of wheat bought in the first day of operations of the EMA, to be known as Egycomex, came in at LE9,750, according to a Ministry of Supply statement. The offered bids included the bidding price in addition to a small fee.

The new exchange will be operating twice a week, with traders buying and selling commodities at current market prices, making it a “spot market”. It will host future transactions at a later date.

The new exchange will function like a stock exchange, with anyone using the platform, whether buyer or seller, needing to be registered. Its role is that of a matchmaker between the buyers and sellers of commodities at large volumes that can be stored for long periods.

Two-hundred companies, including 36 mills, have so far registered on the exchange in Cairo, and the government is studying the possibility of its trading 10 more commodities, including rice, gold, and steel, according to Reuters.

Every product traded on the electronic platform will have a designated price, quantity, and grade showing its quality. Sellers, whether traders or producers, will not bring their goods to a trading floor, but they will be available for immediate offloading to buyers in certified warehouses. The Holding Company for Silos will be in charge of delivery.

The GASC has been diversifying its purchasing methods to cover local needs for grains amid market disruptions this year due to fluctuating prices and the war in Ukraine. It recently started to buy directly from global suppliers, instead of through its traditional tender system, as it looks for more competitive offers.  

The decision to launch Egycomex is in line with government efforts to cover the needs of private wheat mills and rebalance the market in the wake of rising prices, according to a ministry statement.

Egypt’s private importers and mills have been complaining because they are experiencing difficulties in paying for hundreds of thousands of tons of wheat stuck in the ports because of a dollar shortage that has curtailed imports, causing a spike in bread and flour prices.

“We are in dire need of the exchange in order to regulate the market. The market is not in its best shape, and there are a lot of price distortions,” Ashmawi told Reuters.  

Two years ago, the Ministry of Supply said it was planning to create a commodities exchange where a wide range of commodities including gold, eggs, and oil would be traded.

The new exchange has been created to regulate the trading in commodities that can be stored, prevent unjustified price fluctuations, curb inflation, end monopoly vendors, and make available the wheat needed by the private sector by establishing a system based on supply and demand to achieve market stability.

Major shareholders in the exchange include the Egyptian Stock Exchange (34.07 per cent), GASC (10.99 per cent), the Egyptian Agricultural Bank (9.89 per cent), the National Bank of Egypt, and Banque Misr (6.59 per cent each).

Hussein Boudi, head of the Mills Division at the Egyptian Industries Federation, said the exchange would allow transparency in the amounts and prices of commodities. It would create a balance between supply and demand, curb manipulation, and put a cap on the price hikes that consumers have been shouldering, he added.

This is not Egypt’s first commodities bourse, as an earlier Cotton Exchange closed in the 1950s.

*A version of this article appears in print in the 1 December, 2022 edition of Al-Ahram Weekly.