A significant role in maintaining political and social stability in Egypt was played by the program of local authorities to subsidize the production of special cheap bread - baladi. Every year, the Government Purchasing Organization (GASC) under the Ministry of Trade of Egypt not only bought grain from its own producers at prices 20-50% higher than world prices, but also purchased significant volumes of wheat on the foreign market. This grain was already sold at subsidized prices (40-50% below the market) to Egyptian flour millers with the condition that their product would be sold to bakers with a minimum markup. The annual costs of financing the state program to provide the population with baladi amounted to about 5% of the country’s budget expenditures; the purchase of wheat on the foreign market for its implementation was 8-10 million tons.

“For the last two years, due to a lack of finances, the Mursi government has not been very willing to allocate funds for these purchases, gradually reducing the volume of bread subsidies,” says Arkady Zlochevsky, head of the Russian Grain Union. “As soon as Mursi was removed, purchases picked up.” This is confirmed by data from the SovEkon agency: over the last grain year (June 31, 2012 - July 1, 2013), the Russian Federation supplied 2.7 million tons of wheat to Egypt, or 25% of the total export volume of this type of grain; for comparison, in the 2011-2012 season this figure was 35%.

Following the results of the first Egyptian tender of the current grain year, Russian exporters feared losing this sales market. The cheapest offer of Russian wheat was $257.95 per ton, while the offer of Ukrainian and Romanian competitors was at the level of $249.83-253.88. “Over the past five tenders, GASC purchased 1.1 million tons of wheat. Russia is still in last place with 180 thousand tons, ahead of it are Ukraine (360 thousand tons) and Romania (540 thousand tons). In previous years, Russia usually took first place place among GASC suppliers,” says SovEkon executive director Andrey Sizov. In his opinion, Egypt, which is rapidly losing foreign exchange reserves, is placing its main emphasis on price, and not on the quality of goods, as was the case before. “In July, Russia supplied Egypt with one and a half times less grain than in July 2012,” notes Mr. Sizov.

Svetlana Mentyukova

Stability mixed with flour