Egypt Seen Buying More Russian, U.S. Wheat on Financial Woes
Egypt, the world’s largest wheat importer, is poised to increase buying from Russia and the U.S. as it relies more on deals with governments than private trade amid deteriorating finances, according to CHS Inc., which markets 2 billion bushels of grains and oilseeds a year.
Egypt has cut wheat imports for its subsidized bread program by 35 percent to 3.4 million metric tons in the 12 months ending in June as the government struggles to raise funds, the U.S. Department of Agriculture’s Foreign Agricultural Service estimates. Total imports, including by the private sector, will decline 33 percent to 8 million tons, the USDA estimates.
“There will be more government-to-government type of business that will not change global supply and demand, but can dramatically change regional supply and demand,” Claudio Scarrozza, chief executive officer Europe for Inver Grove Heights, Minnesota-based CHS, the largest U.S. grain-marketing cooperative, said in an interview in Lausanne, Switzerland, today. Russia and the U.S. are the most likely countries to help Egypt, he said.
Egypt’s foreign reserves have plunged more than 60 percent below their December 2010 levels, reaching $13.4 billion last month, equivalent to less than three months of imports, and the country’s currency is down 7.8 percent this year. Egypt’s talks with the International Monetary Fund in Cairo ended without a loan agreement this week.
“The currency reserves of the country are shrinking dramatically, and they will probably keep going down because the tourism that was the largest source of currency is going down,” Scarrozza said. “Their ability to pay and to confirm letters of credit is going to be key, and that’s a worry for us.”
Egypt will import 7 million to 8 million tons of wheat in the 12 months starting July 1, Scarrozza said. The share of purchases by the country’s General Authority for Supply Commodities will grow compared with the private sector, he said. The USDA forecasts imports will rise to 8.5 million tons for the next season, from 8 million tons this year.
Egyptian President Mohamed Mursi will travel to Moscow on April 19 for talks to boost bilateral relations and business, Middle East News Agency said April 13. Egypt has held talks with India, the U.S. and Kazakhstan this year on wheat supplies.
Food supply in Egypt will play a major role in stabilizing the region, and U.S. and other governments understand the threat, Scarrozza said. Twenty-five percent of Egyptians lived below the poverty line in 2011, according to state figures.
“If you add to political instability the food instability, that’s a major issue,” he said. “The region is already unstable, if you add Egypt to that, it’s going to be a major problem for the world. Maintaining a level of food in Egypt is in the interest of everybody.”
Wheat demand from other North African countries, including Algeria, Morocco and Tunisia, also gives rise to “a lot of question marks” because of political and financial issues, Scarrozza said.
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