French, Russian competition surges ahead of the former market leader
CAIRO: US Wheat Association Vice President Dick Prior said Egyptian imports of US wheat should again reach nearly 2 million tons this year, worth an estimated $400 million, countering claims that Egypt is shifting away from the American product in favor of French and Russian wheat. Prior s comments came during the Annual US Wheat conference held Tuesday in Cairo.
Egypt is the second-largest importer of wheat globally behind China, with about 6 million tons imported annually. Although recent years have seen US wheat drop from the top spot to number three with about 25 percent in 2005-6, Egyptian officials maintain that importing decisions are unrelated to politics and are based only on price and quality. In 2005-6, French wheat took the lead in Egyptian imports with 32 percent.
The government s General Authority for Supply Commodities (GASC), responsible for 90 percent of wheat imports, purchased 1.9 million tons from the US in 2004-5, compared with 1.3 million tons from France and 800,000 tons from Russia.
The Egyptian market is very important for us, Hassan Abdel Ghaffar, US Wheat Association marketing director for the Middle East and North Africa told The Daily Star Egypt. But it s very sensitive to price shocks.
US soft wheat varieties, the types imported by GASC, reached $200 per ton in 2005-6, up from about $145 per ton in 2004-5. Russian and French wheat have also climbed from $125 and $140 per ton, respectively, to $180 per ton, according to GASC.
Abdel Ghaffar said last season saw unusual weather conditions including strong hurricanes in the US and droughts in Eastern Europe and Asia, all of which resulted in lower supplies of wheat globally and higher prices with increasing demand.
Right now, US wheat has become very competitive as far as price, said Abdel Ghaffar. I think we ll see Egypt come back to US wheat with next season s harvest as prices will stabilize.
Still, Prior said Egyptian importers, especially in the private sector, have yet to take advantage of the $150 million in credit lines offered by US Wheat to simplify the ordering process. Even GASC continues to pay for most of its purchases using cash transfers.
GASC s share of Egyptian wheat imports is expected to decline in the next five years as the Ministry of Social Solidarity (MSS) gradually implements its plan to hand the process over to private and partially private wheat mills, and then buy the processed wheat through tender offers.
MSS began implementing the new system in Ramadan in five governorates, including Alexandria and Ismailia despite adamant protests from the mills.
Hassan Badawi, head of the Mills Division in the Federation of Egyptian Industries, says in order to produce the minimum of 9,000 tons of flour in three months, as required by the ministry, the average mill will need LE 10 million just to import the wheat. The sum, he argues, is far beyond the capabilities of the average mill.
Egyptian flour mills have traditionally relied on purchasing wheat imported by the Ministry of Supply, which was dissolved in December 2005 and partially replaced by GASC.
