Egypt, the world’s largest wheat importer, may increase purchases of the grain from major global suppliers such as the United States and Australia to quell rising food price inflation, trade sources and analysts said on Monday.
Egyptian protesters were camped out in central Cairo yesterday and have vowed to stay until they topple President Hosni Mubarak.
“Egyptian authorities may react to concerns about food price inflation by indeed increasing their purchases from the rest of the world to increase their domestic stockpiles,” said Luke Mathews, an agricultural commodities strategist at Commonwealth Bank of Australia.
US wheat futures bounced back almost 1% in Asian trade on Monday after tumbling more than 2% on Friday as the unrest in Egypt prompted concerns about grain shipments to the north African country.
“The immediate short-term impact will be on trade flows and rising shipping insurance costs for that part of the world,” said Brett Cooper, senior manager markets at FCStone Australia.
“Longer-term when governments are under pressure in emerging markets they will make sure that people’s stomachs aren’t empty.”
Algeria has already ordered a speeding up of grain imports to head off potential unrest over food prices, a government source told Reuters last week.
Egypt bought around 540 500 tonnes of Australia’s wheat in the marketing year to September last year, or 4% of Australia’s total exports of 14,68 million tonnes.
“Aussie wheat is very competitive on a landed basis (in Egypt) and I would expect more business being done over the next 6 months,” a Melbourne-based grain trader said.
Sales are likely to be helped as Australia, one of the world’s top four wheat exporters, is harvesting more of the lower quality wheat preferred by Egypt’s state-owned wheat buyer, the General Authority for Supply Commodities (GASC).
Excessive rains could see up to half of Australia’s 2010/11 wheat crop, estimated at around 24 million tonnes, downgraded to general purpose or even lower quality feed wheat, according to analyst estimates.
“Traditionally Egypt has been a useful market for Australian wheat, from a quality perspective this year we certainly have the wheat to go there, it is just a question of price as Egypt is pretty price sensitive,” said Cooper, adding that the country imports wheat from many origins depending on price.
“What’s likely to be seen is the perceived short-term impact on trade flows versus the risk of higher prices going forward,” he said.
Australia is in the final stages of its 2010/11 wheat harvest. Its main customer is Indonesia, which bought 22 percent of the country’s total exports last marketing year.
Egypt imports around 40% of its wheat to subsidise food for the poor, with around one-third of the subsidy spent on bread.
The country had been heavily reliant on wheat from the Black Sea region but when Russia banned grain exports in early August last year because of a severe drought prices sky-rocketed, causing concern in north African countries.