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July 15, 2013

Russia Urges Discussion on Providing Wheat Aid to Egypt

by Reuters

Russia's Agriculture Ministry offered to hold discussions on possible humanitarian deliveries of wheat to Egypt, a reversal of policy that Egyptian officials and traders interpreted as a sign of political support.

Egypt, the world's biggest wheat importer, has less than two months' supply of imported wheat left in its stocks, ousted President Mohamed Morsi's minister of supplies said last week.

“We need to discuss questions related to humanitarian aid deliveries to Egypt with the world community... There have been no requests [from Egypt] yet,” Russia's Deputy Agriculture Minister Ilya Shestakov told a news briefing in Moscow on Monday.

Shestakov's remark appeared to be a reversal of policy since Russia rejected a request from former president Morsi in April when he visited Moscow for help securing supplies of vital commodities on concessionary terms.

Officials and traders in Egypt saw the proposal as a political statement to help support Egypt at a time that a military-backed interim government is taking over.

“Politics has entered into economics here,” a source in Egyptian government said.

“The previous government, before the mass protests of June 30 and the events that followed, had tried to get some kind of wheat aid from Russia but was refused, and now that the situation has changed, this is a political statement more than anything,” he added.

The United Nations Food and Agriculture Organization (FAO) and the Egyptian government source said Egypt, meanwhile, was not in urgent need of wheat aid after receiving financial help from Gulf countries.

Since the army ousted Morsi last week, the United Arab Emirates, Saudi Arabia and Kuwait have promised $12 billion in cash, loans and fuel, which economists say buys Cairo several months to fix its finances.

Abdolreza Abbassian, a senior FAO economist said, “We do not see any urgent disruption in the food chain as a result of the domestic political problem for the time being.”

Big commercial supplier

Even so, a Cairo-based trader said that from the market point of view, if Russia supplies wheat aid for free or as a long-term financing, Egypt will definitely accept it.

“Right now economically, with the money from the Gulf, Egypt is in a better position compared with two weeks ago,” the trader added.

The idea that Russia could send wheat as humanitarian aid came as a surprise also because of Russia's status as a big commercial supplier to Egypt and the fact that its own wheat stocks are low after last year's drought.

“It wouldn't make much sense really, because the wheat trade is in the hands of the private sector rather than the government, unless they have some old crop wheat that they would like to give as aid when they are cleaning up their silos,” a second Cairo-based trader said.

As of last week, Egypt, which usually imports about 10 million tons a year, with Russia as a major supplier, had just 500,000 tons of imported wheat left. The government's total stocks including wheat from the domestic crop amounted to about 3.5 million tons.

Earlier this month, Egypt bought 180,000 tons from Romania and Ukraine on the international market on commercial terms for delivery in early August.

Grain traders expect Egypt's state grain buyer, the General Authority for Supply Commodities (GASC) to issue a new tender to purchase wheat soon, although GASC's vice chairman said last week that high prices and availability of stocks made that unlikely.

The Russian government, meanwhile, plans to start buying grain on the domestic market to replenish state stocks after the end of harvesting campaign in late September or October, Shestakov said. Officials said previously that Russia might buy 6 million tons of grain for its stocks this year.

Taking into account state restocking campaign and low carryover stocks, Russia's supply and demand balance of grain will be tight this 2013/14 marketing year, which started on July 1, Shestakov said.

He kept the ministry's 2013 grain crop forecast unchanged at 95 million tons and said that from this amount 71 million tons would be used to cover domestic demand. He pegged the 2013/14 exportable grain surplus at 20 million tons.