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Fears of currency devaluation lead to Egyptian aggression

Egypt bought 420,000t of wheat last week


Alex   Black

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Alex   Black
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Fears of currency devaluation lead to Egyptian aggression in wheat market #clubhectare

Speculation Egypt may devalue its currency could be behind Egypt’s aggression in the wheat markets.


Egypt’s Gasc made its biggest purchase in nearly three years last week as it bought 420,000 tonnes of wheat from Russia and Romania.


Two-thirds of the purchases to date have been Russian wheat and Romania has been the second largest supplier.

 

Catch up


Egypt is also ’playing catch up’ since it dropped a zero tolerance stance on ergot contamination in mid-September.


Benjamin Bodart, director, CRM Agri Commodities, said: "They are in some sort of financial trouble at the moment and the government may decide to devalue their currency.


"That is why they have been more aggressive. There is a fear imports may cost more money after devaluation."


Helen Plant, senior analyst, said the purchase by GASC last week means Egypt is buying almost at the same pace as last year.


"This takes the total bought by Egypt’s state buyer, GASC, to two million tonnes, only fractionally behind last season’s pace (2.1mt) after a slower than usual start due to the ergot dispute."


A zero tolerance policy led to boycotts from suppliers, given the difficulty of guaranteeing ergot-free cargos. Importing nations typically allow contamination of up to 0.05 per cent.

 

UK


Mr Bodart said there had not yet been any benefit for the UK.


"Generally speaking, the UK is exporting more towards Algeria.


"Egypt will continue to import from Russia and Romania but will look to switch to US origin wheat as Black Sea origin becomes more expensive in the winter," he said.


The average paid by GASC was nearly $16/t (£13/t) more expensive than before the ergot ’crisis’.


"The US will be the only place to be able to source big quantities of wheat," Mr Bodart added.


"But we are not excluding the idea the UK could gain. I would not be surprised if the UK does get some benefit of exports to Egypt from it."


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