Ukrainian wheat has been offered lowest at $244 per metric tonne (€223.4) at Egypt's largest single tender, a price traders say is at a premium due to delayed payment terms and long shipping periods.
Around 102 offers were submitted by 15 suppliers in the tender, which seeks 3.8 million metric tonnes over an October to April shipment period.
"The two main factors are the long 270-day letters of credit and the risk factors. Future conditions are not guaranteed, whether it's the geopolitical circumstances or maybe market volatility," said one local trader on high prices.
Egypt's state grains buyer, the General Authority for Supply Commodities (GASC), launched the massive tender last week in a change of strategy that was seen as capitalising on a recent slump in global wheat prices. Earlier this month, prices fell to around four-year lows.
"I think it could be possible for GASC to buy the full volume. There is a decent number of offers both for the wheat and the ocean shipping," a European trader said.
"But the delayed payment terms look like they'll increase the cost of the purchase despite prices falling and Russia reducing its export taxes."
Wheat Imports
As one of the world's largest wheat importers, Egypt relies heavily on these imports to provide subsidised bread for tens of millions of its citizens. GASC alone imports around 5.5 million tonnes of wheat annually to support the country's bread subsidy programme.
Egypt had been grappling with high inflation in the past two years and has needed the support of the International Monetary Fund and friendly Gulf countries, who have injected billions of dollars in loans and investments in 2024 alone, to tackle a foreign currency crunch.
For the fiscal year 2024/25, GASC plans to secure a total of 8.25 million metric tonnes of wheat for bread subsidies, sourced from both local harvests and imports, at an estimated cost of nearly 96 billion Egyptian pounds ($1.95 billion), according to the state budget.
Wheat Stocks
The government has already procured 3.6 million metric tonnes in the local harvest this year.
"The 3.8 million metric tonnes in the tender represent the shortfall GASC anticipates for bread production until April, when the next local harvest begins," said Noaamany Nasr, a former adviser to the supply minister.
Nasr had also told Reuters in advance of the offer submissions that the large volume of wheat, the extended shipping timeline as well as the payment terms may lead traders to offer their bids at a premium.
The lowest offer was presented by Olam for 60,000 metric tonnes for a 1-15 October shipping period. One offer by Al Dahra was rejected due to number of bid bonds, traders said.
