04:12 PM
Thursday 02 June 2022
I wrote – Shaima Hefzy:
The world is looking forward to a breakthrough in the global wheat market with prices returning to calm and the possibility of an increase in supply with higher crop production from Australia.
Wheat futures fell on the Chicago Board of Trade, due to the possibility that Russia will lift its blockade of the Black Sea ports in exchange for the lifting of sanctions, and the price of wheat this week reached its lowest level since May 4.
Reports indicate that Russia discussed Black Sea exports with Turkey on Monday and said it was ready to help guarantee Ukrainian exports, although some analysts remain skeptical.
In addition, June weather appears favorable for US agriculture, while no US warnings have been issued about weather threats affecting crops.
Earlier in May, a lower-than-normal planting of spring wheat sent wheat futures contracts to multi-month highs.
US data indicate that global wheat production will decline to 774.83 million tons in 2022-2023, compared to 779.29 million tons a year ago.
While farmers wait for what will happen in America, Australia is heading towards record wheat production for the third consecutive year in 2022, supported by good weather that supports agriculture across the grain-growing areas.
The expected higher production could ease global fears of tight supplies that have caused prices to rise since the Russia-Ukrainian war at the beginning of the year, which spread to fears of a global food crisis.
India’s recent move to ban exports and bad weather in the US have also added to concerns about a food-grain glut.
Increased production in Australia, which became the second largest exporter of wheat in the world in 2021-2022, is driven by the cultivation area, which reached an all-time high at 35.7 million acres.
Analysts expect the crop to rise to between 30 and 35 million tons during the new season, close to the previous year’s production of 36 million tons, according to CNBC.
Egyptian moves
After canceling several tenders to buy wheat due to high prices and non-receipt of offers, Egypt managed this week to buy a shipment of 465,000 tons of wheat for shipment in July and August, including wheat from Russia, Romania and Bulgaria, in the latest international tender.
According to Archyde.com, this is the largest purchase since the outbreak of the war in Ukraine, as the authority bought 350,000 tons of wheat in a tender in April, the only tender since the war began in February, while it was buying directly from suppliers.
Although the cost of buying wheat in the last tender is still high, as Archyde.com quoted traders as saying that the cost of the shipment amounted to $480 per ton, this price was about $10 less per ton than the previous auction.
The government is making many efforts at the present time to secure the sources of wheat for Egypt, whether through the crop that is currently being harvested, or by working to diversify the available sources for the purchase of wheat globally.
At the local level, the government aims to collect 6 million tons of the local crop by obligating farmers to supply a share of the crop to the government, in addition to raising the import price from 820 pounds to 885 pounds, with an additional incentive of 65 pounds per ardeb.
With these measures, and calculating what is to be supplied, Egypt’s wheat reserve will increase to be sufficient until January 2023, according to what the Minister of Supply said.
The decline in international prices will also enable Egypt to diversify its sources of wheat supply during the coming period, while negotiating with India to purchase 500,000 tons, in addition to the government’s decision to raise the permissible moisture content in wheat from 13.5% to 14% to allow access to other types of wheat, And reduce the cost of purchasing from suppliers.