New government rules lead to lower tender amounts
CAIRO: The General Authority for Supply Commodities (Gasc) held its first wheat tender in 2007 on Thursday to import 60,000 tons in soft white varieties for delivery in early February. No word from the authority was immediately available on the competing companies.
Gasc announced it will hold additional tenders for 10,000 tons of local-grown wheat to be delivered from mid-February to mid-March. The tender announcements mark a significant reduction in size as most previous tenders ranged from 200,000 to 300,000 tons for imported wheat.
The tenders come in light of the Ministry of Social Solidarity’s (MSS) recent effort to shift wheat importing from Gasc to the private sector. Gasc now sells the wheat it imports to government-owned and private sector mills for processing then purchases the flour for distribution to subsidized-bread bakeries.
Gasc is still awaiting the delivery of 120,000 tons of wheat from Kazakhstan worth $29 million (LE 165.6 million). The deal, signed in November, was made in an effort to boost bilateral trade between the two countries, but marked one of the highest per-ton prices agreed to by Gasc in the past year at $241.
Egypt has reduced its order volumes in recent years of high-fiber wheat because of increasing global prices. The most Gasc paid in 2005 was $160 per ton of United States hard-red wheat, a high-protein variety. The majority of the 5.8 million tons imported by the authority comprised soft white varieties for prices in the $120-$140 per ton range. Final 2006 numbers have not yet been released.
MSS began implementing the new system in Ramadan in five governorates, including Alexandria and Ismailia despite the loud protests of 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.
Flour mills have traditionally relied on purchasing wheat imported by the Ministry of Supply, which was dissolved in Dec., 2005 and partially replaced by Gasc.
MSS launched its effort to reform in August, pushing forward new contracts with flour mills on one end and bakeries on the other to improve the quality of subsidized-bread and cut down on black-market selling of subsidized wheat and flour, while continuing to make available bread at LE 0.05 per piece. The moves on both fronts have been with strong resistance with millers and bakers claiming the new contracts are unfair.
Egypt is the second-largest importer of wheat globally behind China, with about 6 million tons imported annually. Traditionally, the country has relied on the United States for more than half of the imported amount with the rest split between Russia, Argentina, France and Austrialia. But recent years have seen US wheat drop from the top spot to No. 3 with about 25 percent in 2005-6, Egyptian officials maintain importing decisions hold no connection to politics and are only based on price and quality. In 2005-2006, French wheat took led Egyptian imports with 32 percent.
“The Egyptian market is very important for us, Hassan Abdel Ghaffar, US Wheat 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.