Egypt: Secure wheat reserves

Russia’s wheat harvest will decline to 83 million tons this year due to frosts and drought, down from 92.8 million tons in 2023 and a record 104.2 million tons in 2022. New forecasts point to a clouded outlook for next year as well.

Since Russia is one of the world’s leading grain exporters, such developments will have direct implications for global wheat prices and inflation in major buyers like Egypt.

It noted that despite Russia’s near record pace” in exporting wheat in recent months, its “exports are expected to slow due to a bad harvest and export curbs aimed at containing domestic price growth, including an expected cut in export quotas by two-thirds from January 2025.

Hussein Boudi, vice chair of the board of the Cereals Chamber in the Federation of Egyptian Industries, said the drop in Russian exports would not have an immediate or near-term impact on the local market, stressing that the quantities available were sufficient to meet consumer needs and to keep flour prices stable.

According to Minister of Supply Sherif Farouk in a statement on 5 November, Egypt will soon have a strategic wheat reserve sufficient for five months. The General Authority for Supply Commodities (GASC) has signed contracts with three countries to import a total of 290,000 tons of wheat to be delivered next month.

These countries are Romania (120,000 tons), Ukraine (120,000 tons), and Bulgaria (50,000 tons). Their supplies will bring the strategic reserve up to five months.

Russian farmers have been complaining about the poor profitability of grain crops. Rising costs of equipment, fuel, export duties and other such developments have eaten into profit margins. The farmers are contemplating switching to more profitable crops such as soybeans and sunflowers, it said.

However, such a switch is unlikely, according to Nader Noureldeen, professor of water resources at the Faculty of Agriculture at Cairo University. Soybeans and sunflowers are summer crops, while wheat is a winter crop, he explained.

Noting that the anticipated decline in wheat production from 92 million tons to 83 million tons comes to less than nine million overall, Noureldeen said that this would not necessarily impact exports.

The Russian population of approximately 145 million consumes 25 to 30 million tons of wheat a year, he said, which leaves a surplus of 50 million tons for export. This has been the average volume of Russian wheat exports during the past five years.

Noureldeen suggested that other factors might be driving Russian farmers away from wheat. Some relate to the fallout from the war with Ukraine, such as rising shipping insurance costs due to the higher risks associated with a conflict zone, and US pressures on the importers of Russian wheat to seek alternative sources.

Emad Al-Saaei, a logistics expert, said that it was premature to make predictions about a strategic crop like wheat so far ahead of the harvest season. He suspected that the motive was political and tied to the West’s anti-Russian sanctions regime.

The aim is to drive global wheat prices down, reduce Russia’s wheat revenues, and undermine its influence as the world’s largest wheat exporter, he said.

If the sanctions succeed in bringing down Russian wheat prices, Al-Saaei said, Russia might resort to selling its produce outside the global grain exchanges at competitive prices. Some developing countries, especially in Africa which do not deal with the exchanges, would leap at the opportunity to purchase wheat directly from Moscow at lower than average global prices.

Egypt, Algeria, and Iraq, all major grain importers, would be among these countries.

Al-Saaei saw another potential opportunity for Egypt in that Russia could use Egypt’s grain-storage capacities, enabling it to serve as a distribution hub with Russian shipments unloaded and temporarily stored in Egyptian silos preparatory to their re-export to their final destinations.

Russia worked out a similar arrangement with Turkey early in the Ukraine crisis, but it did not last because of Turkey’s failure to comply with Russia’s criteria.

Tags: Ukraine, Russia, Egypt, harvest, export, Romania, wheat