Egypt Ministry To Consider Removing Wheat Tender Hurdles

Egypt, the world’s top wheat importer, is reviewing its tender specifications in a sign that it could be opening itself up to buy from more countries in light of rising prices and political volatility in major suppliers such as Ukraine and Russia.

Egyptian Supplies Minister Khaled Hanafi said on Wednesday that he would form a committee to remove obstacles in wheat import tender specifications.

The minister, who was appointed last month, had already pledged to review the limit set by the government’s wheat-buying authority in January on wheat moisture. The limit dealt a blow to French exports to Egypt.

Egypt’s basic moisture limit in its tenders is 13 percent. But the January revision ended a tolerance of up to 13.5 percent moisture, with penalties for the seller. Egypt had earlier this decade already reduced this limit from 14 percent.

Although grain lobby France Export Cereales has been pushing the argument that Egypt needs to keep its supply options open, any loosening of the moisture rule has been viewed as unlikely in 2013/14.

The move to review the specifications, which was announced after the minister met on Tuesday with traders and bakers, was cautiously welcomed by European exporters.

“Let’s not claim victory yet…but it seems we are on the right track,” said one European trader. “They (the Egyptians) are perfectly aware that if there is a problem in Russia tomorrow, they will need to be more flexible and not shut the door on suppliers.”

Russian forces have taken over military installations across Crimea, Russian territory until Soviet leader Nikita Khrushchev gave it to Ukraine in 1954, raising concerns about grain exports from the Black Sea.

OPTIONS OPEN

Another trader said that Egypt needs to keep its options open, necessitating changes in its tender booklet.

“Egypt will have to change its specs indeed– (it is) illogical not to as it precludes French,” said the trader, who sees Russian wheat as best placed for the next tender due to its freight advantage.

Egypt’s General Authority for Supply Commodities (GASC) buys around 10 million tonnes of wheat per year from international markets. It uses a mixture of domestic and imported wheat for its subsidized bread programme, which feeds millions of people.

It its most recent tender, on February 27, Egypt bought 295,000 tonnes of Russian and Romanian wheat.

Traders say they expect GASC to tender at least one more time before the local wheat harvest begins in mid-April.

Hanafi said last week that Egypt would aim to purchase the same amount of local wheat from its farmers’ 2014 crop as it did last year, when the government bought 3.7 million tonnes of home-grown wheat.

Pressure had been building for a change to the tender specifications.

“There is a huge push from all sides to change some specifications in the booklet, some of them are too stringent and push the prices offered up unnecessarily,” one Cairo-based trader said. “They could easily be revised without any compromise on the quality of the wheat.”

A government source told Reuters that the minister’s meeting on Tuesday with traders had resulted in “an understanding that the specifications of the booklet will change soon.”

“Egypt has to open the door to all origins,” the source said.

Hanafi also said that his ministry was aiming to expand the use of electronic “smart cards” in the subsidized bread programme nationwide in three months.

A pilot project in Port Said begun before Islamist President Mohamed Mursi was ousted by the army last July has enabled the government to keep tabs on individual consumption of bread via the electronic cards, already used for other subsidized goods such as rice and sugar.

The government says that about 18 million Egyptian families use smart cards to receive subsidized goods.

Hanafi gave no further details about the timeline of the nationwide smart card rollout.

Source: Reuters