The decision by Egypt to transfer its wheat import program to an entity affiliated with the military around four months ago was anything but smooth, as local prices have risen and stocks are falling, traders said.

Egypt, which is one of the largest wheat importers in the world, relied previously on the General Authority for Supply Commodities to carry out large-scale international bids and secure supplies through long-standing finance agreements.

Mostakbal Misr was the entity responsible for this task until December.

The change has not been explained.

Egypt's wheat import program is crucial to its survival. It distributes bread at subsidised prices to tens and millions of people, providing a lifeline for a nation facing an inflationary crisis and a high cost of living.

The switch, according to traders, has made Egypt one of the least transparent wheat buyers.

Mostakbal Misr, instead of purchasing wheat from the global market in public tenders, has mostly sourced it through local Egyptian importers who, according to traders, primarily purchase from Russia.

Three traders claim that Russian suppliers are reluctant to work with Mostakbal Misr due to its lack of commodity trading experience.

One trader stated that Russian and global suppliers prefer to work with experienced Egyptian importers, rather than military organisations who have no experience in the trade.

The traders claim that this shift in buying model by Mostakbal Misr has led to an increase of 10% in wheat prices in the domestic market.

Two traders claim that representatives of Mostakbal Misr were present at ports and agricultural offices in order to supervise incoming cargo. Negotiations took place at the headquarters of Mostakbal Misr to accept part or all of it.

Two traders said that Mostakbal Misr still charges the state in U.S. Dollars and relies on GASC for financing arrangements despite buying locally and paying local suppliers with Egyptian pounds. This adds another layer of complexity.

The Egyptian Supply Ministry didn't immediately respond to our request for a comment.

Compared to mid-2024, the wheat reserves are now only enough to cover five months' consumption (including future deliveries), down from seven months.

One trader who has knowledge of the situation said that since taking over Mostakbal Misr, it has signed contracts with Egyptian suppliers for 2.7 millions metric tons, including 1.7million tons for delivery in February and March.

He noted that around 850,000 tonnes of coal have been delivered to date.

He said that around 1.7 millions tons of grain were bought with 270-day letters credit. Between 900,000 and one million tons of grain were purchased using funding from the International Islamic Trade Finance Corporation, which lends Egypt foreign currency to purchase grains.

He added that in both cases Mostakbal Misr had to still rely on GASC for the management of the purchases. Financial backers such as the ITFC, and the European Commission, have yet to embrace the change.

The ITFC and European Commission signed an agreement to support Egypt's grain exports via GASC, and not Mostakbal Misr.

A trader asked why GASC receives funds from foreign lenders when Mostakbal Misr handles grain imports exclusively. (Reporting and editing by David Evans; Mohamed Ezz)

(source: Reuters)