LONDON — Funding problems are forcing top world wheat buyer Egypt to consider abandoning its regular public tenders that have been a centrepiece of world grain trade for decades.
Egypt’s state grains buyer General Authority for Supply Commodities, (GASC), is exploring options beyond systematic tenders to secure future needs, banks involved in commodity trade finance for the country said. Imports to the north African country are sharply down this year, with strategic stocks falling as it endures economic and political crisis, but state and private buyers insist they have funds to keep the nation supplied with its staple bread.
Falling currency reserves are hindering GASC’s ability to buy wheat in a timely manner, banks said.
GASC, which last week saw its influential head Nomani Nomani step aside, declined to comment.
“Very clearly people are looking for alternatives because the classic route of letters of credit or cash against documents are not working as they were,” said Fehmi Hannachi, head of commodity finance for Middle East and North Africa at ABC International Bank plc and board member of ABC Egypt.
Karel Valken, global head of trade and commodity finance at Rabobank, said: “Letters of credit are not working to the satisfaction of all parties. It’s definitely restricting the volumes and the timely arrivals of wheat and undoubtedly it’s having an impact on the price. Consequently all the parties involved are looking at different ways to mitigate these issues.”
Egypt normally buys strategically to ensure it has wheat stocks equal to at least six months’ consumption in its silos. By contrast, the government said on Wednesday that it has stocks to last until May 29, or just three months. – Reuters