Wheat’s Biggest Buyer Builds Stockpile to Battle Virus

(Bloomberg) -- The world’s biggest wheat buyer is boosting purchases from local growers in a push to stockpile grain as the coronavirus puts international supplies at risk.

Egypt bought 2.1 million tons of local wheat since the harvesting season began in mid-April, according to the supply ministry. That’s at least 30% more than the amount it bought in the same period last year. The government is also offering farmers higher prices.

The most populous Arab nation is buying as much home-grown wheat as it can to build inventories and produce enough state-subsidized bread for its more than 100 million people, many of whom live in poverty. Although Egypt once supplied wheat to ancient Greece and Rome, it now must import about 60% of what it consumes. Yet, Russia and other major grain producers are curbing exports to protect their own food security amid the pandemic.

“The state is focused on securing basic commodities, especially wheat,” the supply ministry said in a written response to Bloomberg questions. “We’ve also taken measures to encourage farmers to sell more wheat to the government to boost reserves.”

Politically Sensitive

The new steps include setting a purchase price of 700 Egyptian pounds ($44) per ardeb (150 kilograms, 331 pounds), slightly higher than last year. The government has allocated 5.2 million Egyptian pounds for immediate crop payments. In a sign of urgency, farmers and wheat-procurement workers are exempt from the nightly nationwide curfew the government has imposed to contain the virus that has so far infected about 10,000 in the country.

The International Monetary Fund on Monday approved Egypt’s request for $2.77 billion in emergency funding to help the government meet urgent budget needs related to the pandemic.

Wheat is politically sensitive in Egypt. Millions of people depend on subsidized bread, and shortages can spark protests and social unrest. The country’s purchases from overseas provide a reliable benchmark for the international grains market -- of some 20 million tons of wheat that Egypt consumes annually, it imports about 12 million.

This year the government targets buying 3.6 million tons of local wheat, up from 3.2 million tons in 2019. It also plans to import 800,000 tons of wheat during the local harvest season -- an uncommonly large amount, considering this is a time when Egypt tends to pause its international supply tenders.

However, the state buyer -- the General Authority for Supply Commodities -- has imported only 240,000 tons of wheat since the local harvest began. GASC’s latest tender last month drew offers from just five companies, the fewest in more than a year. International producers are focused on building up their own strategic reserves, and Russia, Egypt’s top wheat supplier, has put a cap on exports.

Tender offers may pick up as harvests in the Northern Hemisphere commence in a couple of months, replenishing global supply. Russia’s limit is set to end after June, and restrictions in other nations have already begun to ebb.

Quicker Payments

“The price the government pays for wheat this year is slightly better, but what’s different is we’re getting paid right away, without any complications,” said Mohamed Abu Zaid, who planted 5 feddans (2.1 hectares, 5.2 acres) of wheat this year on his land in Al-Gazayer village in Alexandria province. “We’re getting paid within 48 to 72 hours -- way better than last year.”

The North African nation has so far been spared any scenes of mass panic-buying during the pandemic. Government officials and even supermarket chains have sought since the beginning of the global crisis to reassure citizens that Egypt is well-stocked with staple foods.

While farmers usually hold back much of their crop for their own households, President Abdel-Fattah El-Sisi himself went on TV this season to urge them to sell as much as possible to the government.

“Yes, we’re well organized, and we have good reserves, but with the uncertainty until December, I say it would be better if you only store at home what’s necessary,” El-Sisi said last month. “Sell it to the government to keep it for the benefit of everyone.”

©2020 Bloomberg L.P.