Egypt has refused to sign a major deal to purchase Russian wheat and will instead buy it from France and Bulgaria. The Russian authorities are trying to set an unofficial minimum price for exported grain in order not to lose part of the revenue, but this approach sometimes brings negative results.
Source. Bloomberg
The government can ensure the minimum price by refusing to issue export documents if the deal is concluded at a lower price, people familiar with the situation said. This, they said, forces buyers to renegotiate deals or even abandon them. This is exactly what happened in the case of Egypt.
The Egyptian General Authority for the Procurement of Raw Materials (GASC) agreed directly with one of the Russian exporters to purchase 480,000 tons of wheat, its head Ali El-Mosihi said in early September. The price was below the minimum price that Russia is trying to keep at $270 per ton. The authorities, according to Bloomberg's sources, opposed the deal.
A few days later, Egypt allowed the supplier, the Solaris trading company, to purchase the agreed amount of wheat from any seller. As a result, Egypt will receive French and Bulgarian grain, not Russian.
Such a move will allow Russia to "save face," says Andrey Sizov, executive director of Sovecon: "If the wheat has not been sold, it means that the minimum price set by Russia has not been violated."
"Russia is keeping the same price ($270) and is expected to lose to other suppliers," he writes, citing the results of the GASC tender, where representatives of France, Bulgaria and Romania were able to get many orders by offering slightly lower prices.
This year, Russia will export 46.5 million tons and will once again be the world's largest wheat exporter, the International Grains Council predicts. Russia will also harvest a record crop for the second year in a row: The USDA estimates it at 85 million tons, while Sovecon estimates it at 91.6 million tons.
Currently, wheat prices are at their lowest level in almost three years; they have more than halved since the peak reached after the invasion of Ukraine in 2022.
Quotes are also under pressure as Ukraine has begun to set up an alternative corridor to continue exporting grain through the Black Sea. On Tuesday, the first ship with a cargo of wheat left the port of Chornomorsk towards the Bosphorus and reached the territorial waters of Romania.