France still considering Egypt grain aid, trade doubtful

Mon Jul 1, 2013 12:41pm EDT

* Trade ministry studying Egypt call for import, silo help

* Grain traders say slow response shows France reluctant

* Egypt crisis makes negotiating a deal difficult - traders

* Russia more likely to help - traders

By Valerie Parent and Gus Trompiz

PARIS, July 1 (Reuters) - France is still considering Egypt's request for help with grain imports and storage, the trade ministry said, but market operators were sceptical about major French aid despite a political and economic crisis in the world's top wheat importer.

Two years of turmoil have eroded Egypt's currency reserves, making it hard for the country to finance essential food and fuel imports, and unrest deepened on Sunday with mass demonstrations against President Mohamed Mursi.

In a bid to maintain wheat imports, which support a vast subsidised bread programme that is crucial for stability in the country, Egypt has officially asked for help from France and Russia, two of its main suppliers.

Subsidised Egyptian bread is made of a blend of foreign and domestically produced wheat. The imported wheat is used for its gluten content which is essential for making dough elastic and allowing it to rise.

France's trade ministry was examining Egypt's request, both in terms of financing Egyptian imports and the development of grain storage in Egypt, a spokeswoman said on Monday.

"This is still being studied by our services," she said, adding she did not know when a decision would be made or what any French proposals might consist of.

Traders said major French assistance was unlikely due to domestic budget constraints - as the country tries to meet European Union commitments to cut its public deficit - a limited state role in grain exports and confusion over events in Egypt.

"France does not know how to say 'no' politely," one source close to the matter said.

A French diplomatic source said in early June that France was in favour of making a gesture towards Egypt, following a request made a few weeks earlier.

Egypt asked France for aid to build grain silos in Egypt, for help with wheat imports through an extended payment period of nine to 12 months, and free stocking of wheat in France for up to six months before shipment, official sources said.

CASH-STRAPPED FRANCE

Farm office FranceAgriMer has proposed holding meetings between French government and grain trade representatives, but no such discussions have yet to take place, traders said.

A delegation of private Egyptian millers and importers who had been invited by grain export lobby France Export Cereales to France this week cancelled their trip, citing the political tensions in their country, traders said.

"France hasn't got any money for this," one export trader said. "Even if there were negotiations, you would have to have clear interlocutors and the instability in Egypt makes it unclear whether officials will keep their posts."

The Egyptian army said on Monday it was giving 48 hours to political leaders to meet popular demands before offering its own proposals.

France can provide export credit insurance via specialist institution Coface, but this is not usually as available as the U.S. Department of Agriculture's credit guarantees.

Trading houses themselves were also seen as unlikely to accept the financial risk of offering Egypt favourable terms.

"I don't see any exporter being willing to cut their prices or offer one-year credit," the trader said.

Egypt failed in April to secure grain and a loan from Russia, which said however it could boost exports to Egypt if its 2013 harvest hit a certain volume.

Egypt's state grain buyer the General Authority for Supply Commodities (GASC), which together with private importers normally obtains some 10 million tonnes of wheat a year, has not bought on international markets since February. (Additional reporting by John Irish; Editing by Muriel Boselli, Veronica Brown and David Evans)

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