Egypt may change wheat buying terms ahead of anticipated purchase

Egypt, the world's largest wheat importer, is considering changes to the way it buys the grain ahead of an anticipated purchase to boost strategic reserves, aiming to reduce trade risks arising from any possible export curbs by suppliers.

Egypt's President Abdel Fattah al-Sisi had encouraged authorities to boost the country's reserves of strategic commodities last week amid rising global fears for food supplies due to the coronavirus pandemic.

Traders said on Sunday the country's state grain buyer, the General Authority for Supply Commodities (GASC), could ask suppliers to offer prices on a cost and freight (C&F) basis instead of free-on-board (FOB).

GASC, which was not immediately available for comment, normally asks for wheat prices from suppliers on a FOB basis with freight offered in a separate tender.

"Cost and freight is better because it means the supplier has more control of the cargo," one trader said, referring to the added control of handling the process of shipping.

An undated draft of the tender document seen by Reuters showed GASC would ask suppliers to detail the FOB price of the wheat they were offering, and what the freight would amount to, in order to reflect how the C&F was calculated.

GASC is also considering paying for the grain at its next tender with "at sight" letters of credit, which guarantee immediate payment on receipt of various shipment documents, as opposed to deferred payments, the document showed.

The letters of credit would be paid through the Islamic Trade Finance Corporation, an organization which GASC had previously tapped for funding for wheat cargoes.

The cabinet said on Friday that strategic reserves of wheat were sufficient for four months, ahead of the anticipated harvest of the local crop which begins in mid-April.

GASC had issued an international purchase tender for wheat on Wednesday and promptly cancelled it, a move that baffled traders who are now expecting the buyer to come back into the market seeking the grain soon.

The cancellation had come after traders said GASC had wanted to include a clause in the tender document requiring suppliers to replace contracted wheat of any origin with other cargoes should any coronavirus shutdowns block delivery of contracted cargoes.

Sellers would also bear any costs as a result of the change.

"This latest talk about a change to C&F now shows that they don't want to send a vessel to the port of origin in case a sudden lockdown happens and so they prefer for the supplier to deal with that," another trader said. 

Agriculture.com