Egypt boosts grain market, then slows down again

Wheat took a small step back on the Matif last trading session by €1,50 to €232,25 per tonne. On the Chicago exchange, wheat took a slightly harder hit. The December contract closed 1,9% lower on the CBoT at $6.03½ per bushel. Corn, as is almost usual, is following the trend in wheat this week in a weakened form. Corn closed 1% lower at $4.28¼ per bushel. Soybeans, like grains, also closed in the red and lost 1% to $10.46 per bushel.

Egypt, which earlier this week was one of the driving forces behind the rally on the wheat market with a deal for over 3 million tons of wheat, provided price-depressing news yesterday. News agency Reuters reports, based on sources in the Egyptian grain sector, that the country is going to make an attempt to reduce wheat imports.

Bread subsidy
Bread is subsidized in Egypt and that is becoming too expensive for the government. A rising national debt, a shortage of foreign currency and persistently high inflation mean that the government has to make drastic choices. In the long term, Egypt wants to get rid of the subsidies on bread completely, because it is becoming too much of a burden on the state finances. Complete abolition is not yet an option in the short term.

One in four addition
However, in order to reduce costs and dependence on wheat imports, the government wants to oblige mills and bakers to add cheaper maize and possibly sorghum flour to the subsidized bread. According to Reuters, a 1:4 ratio is being considered from April 2025. This would save roughly 1 million tons of wheat on a total wheat import of 4,75 million tons for the subsidized bread program that Egypt is counting on for 2024/25. 3,5 million tons of wheat will come from domestic production.

Not for the first time
In the past, Egypt has often mixed corn into the bread mix. Under pressure from the industry, bread is now made from wheat only. The new plans are also not very popular with mills and bakers. Bakers fear that they will have more work with a mix of corn and wheat flour and that the baking time of the bread will increase. Mills are paid based on the wheat they process and are therefore not interested in alternative products. Whether the Egyptian consumer is interested in bread with a different taste is also a question and therefore a risk for the Egyptian government.

Brakes off
Corn and soy are an American party. In North America, the conditions for harvesting these crops are reasonably good. Incidentally, the trade seems to attach more value to the weather reports for Brazil and Argentina.

Some rain has already fallen in the past day and more is expected for the coming week. It is difficult to look further ahead, but the rain does not seem to be over in the long term either. In the largest soybean state in Brazil, hardly anything has been sown. According to an estimate earlier this week, the counter is at about 0,5% of the planned area. Now that the weather is changing and the conditions are improving, the seed drills are being pulled out of the shed.