Egypt unaffected by Russia wheat export ban

Egypt, the world's biggest wheat importer, said on Sunday it would not be affected by Russia's decision to ban wheat exports because it has adequate stocks and a policy of diversification.

"Egypt has a wheat supply to cover the production of subsidized bread for the upcoming four months," Trade and Industry Minister Rashid Mohammed Rashid said in a statement.

"The recent decision by the Russian government to halt exports will not have an immediate effect on Egypt," he said.

Rising demand for wheat in Egypt

Demand for wheat in Egypt, the Arab world's most populous country with a population of 80 million, has been rising by around 15 million tons annually, half of which is imported. Egypt is one of Russia's main clients.

Wheat is heavily subsidized by the government in order to keep affordable bread prices for Egypt's population, of whom around 40 percent live on less than two dollars a day.

Rashid said he recognized people's concern ahead of the Muslim holy month of Ramadan, when bread consumption rises.

"There will be no impact because projected supplies for all commodities needed during Ramadan have been in stock for more than three months," Rashid said.

As well as available stocks, Rashid said Egypt's policy of diversification was helping it avoid a shortage. On Sunday, Egypt bought 240,000 tons of wheat from France.

The minister also said that Cairo had decided to suspend wheat imports from Ukraine and Kazakhstan until both countries "finalize their policy on exporting wheat in light of the drought that is impacting the area."

"The changes that are taking place are expected to impact the budget for the fiscal year of 2010-2011 between 2.5 billion and four billion Egyptian pounds (between $400 and $700 million)," he said.

Russia, the world's third largest wheat exporter, said it would ban the export of grain from August 15 until December 31 to keep prices down at home amid the worst drought to hit the country in decades.

There will be no impact because projected supplies for all commodities needed during Ramadan have been in stock for more than three months

Trade and Industry Minister Rashid Mohammed Rashid

No retreat in wheat prices in Saudi

The Saudi grains authority said on Sunday world wheat prices are expected to retreat further but not to the lows seen earlier in 2010 and that it can wait five months before issuing its next hard wheat tender.

Wheat prices in both the United States and Europe retreated on Friday but held just below two-year highs as markets reacted to the sudden imposition of a ban on grain exports from drought-hit Russia.

Waleed Elkhereiji, director general of Saudi Arabia's state-run Grain Silos and Flour Mills Organization (GSFMO), also said the kingdom's domestic harvest of hard wheat stood at 1.1 million tons this year, 16 percent above the 950,000 tons produced last year.

"A drop in input costs, seeds and agricultural equipment, has encouraged planting and led to a higher harvest," Elkhereiji told Reuters in an interview at GSFMO's headquarters in Riyadh.

GSFMO has enough hard wheat stocks to cover the kingdom's needs until April, without taking into account its 990,000 tons hard wheat purchased in June and additional stocks of 90,000 tonnes of flour, he said.

"We are also taking delivery of the local hard wheat harvest: We have so far received 900,000 tons and there is an additional 200,000 tons expected to be delivered by end-September. We have a comfortable level of stocks," he said.

The authority will still need to import 2 million tons of hard wheat before the start of the next harvest in the desert kingdom. "It's the same quantity imported this year".

A drop in input costs, seeds and agricultural equipment, has encouraged planting and led to a higher harvest

Waleed Elkhereiji, director general of GSFMO

Saudi to import soft wheat for the first time

Elkhereiji also revealed that GSFMO will start importing soft wheat for the first time. "Some food industries need it so we are going to import it. If it is not in our next tender it will be the one after it, in 2011. We have already started adapting our mills to be able to process soft wheat".

He declined to elaborate, saying the soft wheat imports have yet to be determined.

Asked about the potential size of GSFMO's upcoming hard wheat tender, Elkhereiji said: "Current level of prices does not encourage buyers to enter the market with large quantities".

"The pre-emptive planning we have gives us five months before issuing the next tender... Prices will decline but they will not return to the lows we have seen earlier this year," he said.

Russia

The price spike after Russia announced its export ban was such that GSFMO would have paid an extra $80 million for its latest hard wheat purchase. "We worked hard and luck was on our side," said Elkhereiji.

"Russia accounts for 10 percent of the world's wheat trade and the drought that has affected it has not spared some other European producers. Still Canada, the United States, China, India and Pakistan are doing well.

"I don't foresee a crisis, or a crisis similar to what happened in 2007 and the prices now are still below their level in 2007."

He noted Saudi Arabia has not imported Russian wheat since 2008.

Since 2008 the desert country has sought to save water by reducing the amount of wheat they buy from local farmers by 12.5 percent a year, abandoning a 30-year wheat cultivation plan that had helped the country cover its domestic needs.

The policy has turned GSFMO into one of the biggest new buyers in the international grains market. GSFMO will sign on Tuesday agreements to expand its silos and milling capacity as it readies for an increase in imports.

It will award the Swiss Buhler AG two contracts worth 368 million riyals ($98 million) to build a 1,200 tons per day flour mill in Mecca and to expand by 67 percent mill capacity in Jeddah to 450 tons per day.

Local firm Haif Company will be awarded a 506 million riyals contract to build grain silos in Mecca with a 250,000 tons capacity.

I don't foresee a crisis, or a crisis similar to what happened in 2007 and the prices now are still below their level in 2007

Waleed Elkhereiji