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UPDATE 2-Egypt approves guarantees for wheat; needs to buy
February 25, 2014 / 2:40 PM / 4 years ago

UPDATE 2-Egypt approves guarantees for wheat; needs to buy

* Traders expect GASC to buy 500,000-700,000 before harvest

* Tender offers could include premium of $3-$5 per tonne (Adds trader comment)

CAIRO, Feb 25 (Reuters) - Egypt’s government has approved financial guarantees of $75.3 million for the import of wheat, the finance ministry said on Tuesday, raising the possibility of a fresh purchase tender despite a shake-up in its import and storage authorities.

Traders expect the world’s largest importer of wheat to buy between 500,000 tonnes and 700,000 tonnes from the world market before its local crop is harvested in April.

“This is for new tenders, it looks like routine but hefty trade finance guarantees,” a European grain trader said.

Egypt’s supplies minister said on Feb. 10 that strategic stock of wheat was enough to last until June 15. The government tendered its resignation on Monday.

The finance ministry statement did not say when General Authority for Supply Commodities (GASC) might purchase wheat, but the amount would allow for import of 240,000 tonnes.

Egypt’s last purchase was on Jan. 28, when it bought 240,000 tonnes of Russian and U.S. wheat for shipment March 1-10.

Since then, Egyptian authorities have referred the head of the central import administration at GASC to prosecutors for suspected corrupt dealings with traders. The head of its silos and storage holding company was also sacked.

The government has said its wheat imports would not be affected by a corruption probe at GASC.

“They need to purchase and they have enough people to do so,” a second European trader said.

When GASC awards a tender the company selling the wheat typically asks for the issuance of an Egyptian state bank letter of credit, which is then confirmed with its own bank.

Last year funding problems triggered an additional requirement for GASC to post cash with Egyptian banks which serves as security for the banks confirming the letters of credit on behalf of sellers. [ID: nL6N0BS71E]

Traders say there would be a very small pool of countries able to deliver wheat in the short time frame anticipated to be stipulated in any tender.

Black Sea wheat was expected to be the most competitive region if a tender was issued in the near term, particularly since the specifications concerning wheat moisture levels had been lowered to a level that French wheat struggled to meet.

One trader said Egypt may have to pay a small premium of $3-$5 per tonne.

“The premium will also be because of the uncertainty and rumours on where GASC stands because of their internal problems,” the trader said.

Egypt buys around 10 million tonnes of wheat a year from abroad through the state and private buyers.

The finance ministry also approved guarantees of $52.4 million for the import of 58,500 tonnes of food oil, the statement said. (Reporting by Tom Perry in Cairo and Sarah McFarlane in London; Additional reporting by Michael Hogan in Hamburg; editing by Veronica Brown)

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