Wheat exports to Egypt could face a tough hurdle, traders say

Although Egypt has included India on the list of its wheat-buying nations, exporters are concerned that Cairo’s sanitary and phytosanitary measures, set in 2019, could be a major obstacle to shipments.

It is not only phytosanitary measures that worry exporters, as trade with Egypt will be difficult with chances of the importer in the port of supply behaving like a spoilsport. They feel that some of the conditions are strained against India.

‘Talk to the gun on the table’

“One of our dealers in Dubai says you have to negotiate with Egyptians and put your gun on the table. The Russians have mastered it. No one is sure how the Indians can handle this,” said a trade analyst based in New Delhi.

On April 15, Egypt included India on the list of wheat-buying nations, and New Delhi said it would try to export three million tons (mt) of this fiscal policy. India is trying to export at least 10 mt of wheat in this fiscal policy compared to an estimated record of 7.85 mt last fiscal year.

In addition to including India on its shopping list, Egypt has included a provision of “second origin” where the protein content of wheat should be 11.5 percent, although it could be acceptable to the level of 11 percent. Compared to Ukraine and Russian wheat, which have a protein content of about 12-12.5 percent, the protein content of Indian wheat is 11.5-12.15 percent.

Confidence in Ukraine, Russia

Egypt had been dependent on wheat from these two former members of the Soviet Union until Russian troops entered Ukraine on 24 February. It had also resulted in a sharp rise in wheat prices. Food grain prices have risen 37 percent since the beginning of the year, and most of the gains came after the outbreak of war.

Currently, benchmark wheat futures on the Chicago Board of Trade are listed at $ 10.75 per share. bushel ($ 395 per tonne). According to the International Grains Council, Argentina quotes wheat at $ 439 free on board (fob), EU France-quality wheat rules at $ 448, American hard red winter wheat at $ 501 and American soft red winter wheat at $ 437.

‘The phytosanitary conditions are harsh. There are two questions to this. Just a phytosanitary declaration may not be enough, ”said Delhi-based exporter Rajesh Paharia Jain.

‘Compliance must’

Asked about the fears expressed by traders, official sources said the phytosanitary conditions are “country-specific requirements and compliance is a must”.

Obtaining phytosanitary certificates (PSC) from the National Plant Protection Organization (NPPO) is a normal procedure and NPPO will make it necessary if exporters ship their products based on the quality requirements of the importing nations. The Department of Commerce will help if an exporter faces a problem, sources said.

Jain said there was always a danger that the shipment would be rejected at the delivery port as the condition of import is not “loading port”. “Can the government ensure that there will be no rejection of the shipments in the delivery port,” he wondered.

Adani ‘experience’

This concern is justified as any dispute over the quality or protein content will result in the price being lowered, according to the announcement of the Egyptian Ministry of Agriculture.

Jain and other exporters point out how Adanis faced rejections in 2003 despite diplomatic efforts to resolve it. “This is still fresh in the minds of exporters,” Jain said.

Exporters said Egypt may have included India to lower the bids for its tenders. Cairo had been primarily dependent on Black Sea wheat from Russia and Ukraine, which contributed 60 percent and 22 percent of total imports.

Last week, Egypt signed agreements to import 3.5 lakh tonnes of wheat from France (2.4 lakh tonnes at an average price of $ 451.75 per tonne fob), 50,000 tonnes from Bulgaria to 449.50 tonnes and 60,000 tonnes from Russia to $ 460 per. ton. Shipping will likely cost between $ 30 and $ 50 per. ton.

Indicates low price

Egypt decided to buy wheat at the tender after canceling the previous two on high bids as its reserves have fallen to just over 2.5 months. “Despite the fears, we quote a very low price in the global market of around $ 350 per tonne. Freight will be at least $ 70 per tonne and ships will have to pay $ 10 per tonne to cross the Suez Canal,” Jain said. .

Other exporters also say that there is an opportunity for Indian shippers to raise the offer price with the wheat prices rising sharply in the global market. “Our problem is that we are trying to undercut each other,” says a South Indian-based exporter.

Earlier this week, Reuters quoted Ahmed El Attar of Egypt’s plant quarantine department as saying that “just because we approved the origin does not mean we accept anything. There are technical conditions set by the plant quarantine department.”

Two objectives

India is trying to squeeze wheat into the global market with two goals. One is to make progress as a reliable and quality supplier of wheat in the global market. Two is to try to cut back on its stocks in the country.

In this, it is helped by estimates of record 111.32 million tons (mt) of wheat this year. Although the Food Corporation of India had 19 mt of wheat stocks in early April, it is currently facing difficulties in procuring the necessary supplies for the public distribution system.

Currently, its purchases are 30 percent lower year-on-year, with farmers either choosing to hold back their products or sell to private retailers.

Industry insiders say India could get into trouble if the FCI is unable to procure at least 25 mt of wheat this year. At present, domestic wheat prices are above INR 2,050 per hectare. quintal against the minimum aid price of INR 2,015.

Published on

April 24, 2022

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