At Egypt's biggest single tender, Ukrainian wheat was offered at the lowest price of $244 per metric tonne. Traders say this is a premium because of delayed payment terms and lengthy shipping periods.

The tender sought 3.8 million tons of cargo to be shipped between October and April.

The risk factors and the long-term letters of credit (270 days) are the two major factors. The future conditions are not guaranteed, whether it is the geopolitical situation or perhaps market volatility," stated a local trader about high prices.

The General Authority for Supply Commodities (GASC), Egypt's state grain buyer, launched a massive tender in the last week as part of a new strategy to take advantage of the recent drop in wheat prices worldwide. Prices fell earlier this month to four-year lows.

"I believe it would be possible for GASC buy the entire volume. A European trader stated that there are a number of offers for both the wheat and ocean shipping.

"But the delayed payments terms seem to increase the cost of purchase despite the fact that prices are falling and Russia has reduced its export taxes."

Egypt, as one of the largest wheat importers in the world, relies heavily upon these imports to subsidise bread for its citizens. GASC imports 5.5 million tonnes of wheat per year to support Egypt's bread subsidy program.

Egypt has been struggling with high inflation for the past two-years and needed support from the International Monetary Fund (IMF) and friendly Gulf states, who have invested billions of dollars and provided loans in 2024 to help Egypt deal with a currency crisis.

According to the state budget, GASC intends to procure 8.25 million metric tonnes of wheat to be used for bread subsidy, both from local harvests as well as imports. The estimated cost is approximately 96 billion Egyptian pounds (1.95 billion dollars).

This year, the government has already purchased 3.6 million metric tonnes of local harvest.

Noaamany Nasr is a former advisor to the Supply Minister. She said: "The 3.8 millions metric tons included in the tender represents the shortfall GASC expects for the bread production up until April when the next harvest starts."

Nasr also warned traders in advance that the high volume of wheat and the long shipping timeframe, as well as payment terms, could lead them to bid at a higher price.

Olam made the lowest offer for a shipping period of Oct. 1-15. Traders said that Al Dahra's offer was rejected because of the number of bid bonds. Reporting by Mohamed Ezz and Sarah El Safty; editing by David Evans, Alison Williams and Alison Williams.

(source: Reuters)