Egypt Is Running First Wheat Tender With New Payment Terms

(Bloomberg) -- Traders will be paying extra attention to Egypt’s first wheat tender since the country changed payment terms in a move that may cut costs for the top importer and its suppliers.

The General Authority for Supply Commodities is seeking wheat for March 11-20 shipment in a tender Tuesday, the first since it changed terms to pay suppliers immediately, rather than in 180 days. That’s expected to cut loan costs for traders that need to finance the initial purchase of grain, which could then be passed on as the cargoes are sold to Egypt.

Egypt’s tenders are closely watched because they help set the tone for global prices. The country, which relies on subsidized wheat to feed its almost 100 million people, has been paying more for imports after severe droughts in Europe and Australia ruined crops. The revised terms may eventually allow suppliers to lower offers by about $3 to $6 a ton, according to a survey of four local traders last week.

In today’s tender, Egypt was said to receive interest from nine companies, with the lowest offering Romanian wheat at $261.34 including freight, according to traders who asked not to be identified. That was below the winning offers in the prior tender this month.

The change in payment terms was welcomed by traders, some of whom in recent years shied away from tenders or charged premiums amid problems including payment issues and confusion over quality requirements. The move followed financing from the International Islamic Trade Finance Corp. to help fund Egypt’s purchase of commodities.

Wheat prices in Russia have climbed to a four-year high amid tighter supplies, and are up more than 2 percent since the last tender on Jan. 9. That has helped make other supplies more competitive. No U.S. grain was among the lowest offers made Tuesday, though French grain was the cheapest after Romania.

GASC hasn’t bought French wheat in a tender since July 2017, data compiled by Bloomberg show. Export prices at France’s Rouen recently became cheaper than at Russia’s Novorossiysk port, before factoring in freight costs. Any purchases today may help to give European grain a boost in a season of lackluster export demand.

To contact the reporters on this story: Salma El Wardany in Cairo at selwardany@bloomberg.net;Megan Durisin in London at mdurisin1@bloomberg.net

To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net, Lynn Thomasson

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