MENA Wheat Watch: Jordan, Saudi Arabia lead on new crop purchases

With four months remaining until Russia and Ukraine begin harvesting the 2023 crop, the state grain boards in Jordan and Saudi Arabia have begun forward purchases of imported wheat, while their peers in the region continue to buy grain from the 2022 harvest.

More than 40% of all global wheat exports go to the Middle East and North Africa, where many governments control the milling industry and the price of bread.

In marketing year 2022-23 (July to June), the US Department of Agriculture estimated the two regions' ports and border crossings will handle 39 million mt and 47 million mt of wheat, respectively. That would be more than the combined exports from Russian and the EU, the world's two largest exporters of the cereal grain.

Immediately after Russia invaded Ukraine in February 2022, the price of wheat from the Black Sea surged 50% as traders contemplated the loss of a quarter of the world's exportable wheat supplies. Since then, it has since become easier to finance and ship wheat from Russia and exports have resumed from three of Ukraine's four deep water grain ports and the price of Russian wheat on March 14, 2023, was at its lowest since August 2021.

That was a relief to some of the biggest buyers of Black Sea wheat whose purchases have been complicated by financing problems in MY 2022-23. Egypt and Turkey, the two largest importers of Black Sea wheat, both ran current account deficits in 2022 and their currencies have weakened.

Egypt

Egypt has staggered the decline of the pound with restrictions on foreign exchange that have forced many private importers to pay in installments to their suppliers, most of whom ship from Russia.

Those suppliers' opposition to such arrangements was demonstrated late in 2022 by the loaded grain carriers floating off the Egyptian coast, as their owners refused to discharge.

"Egypt won't work unless [sellers provide] a kind of credit to avoid late transfers by the central bank," one Cairo-based trader said.

Egypt's large budget deficit became a greater burden for the country in 2022 as global interest rates rose. The timing of the government's wheat purchases has been dictated by the availability of funds, first from the International Monetary Fund, then the World Bank and the Islamic Trade Finance Corporation.

Egypt imported 6.6 million mt of wheat in the first seven months of the marketing year, according to agricultural consultancy Rusagrotrans. Over the same period in MY 2021-22, the country had taken in 11.3 million mt.

Turkey

Turkey's state grain board has so far held just four tenders for milling wheat shipped in MY 2022-23, representing just 2.3 million mt. In the previous marketing year, it bought 3.2 million mt.

TMO waited until Oct. 21 to make its first purchase from the 2022 crop.

In the final months of MY 2022-23, some newspapers in Turkey accused the government of neglecting its own farmers, after it paid $449/mt CIF Samsun for imported wheat in a March tender, which was around three times as much of the domestic procurement price.

Turkey's harvest begins in May and the government typically sets the procurement price in June.

Turkey imported 7 million mt of wheat in the first seven months of the marketing year, according to Rusagrotrans, compared to 9.6 million mt over the same period a year earlier.

Algeria

Algeria's state grain board, OAIC, has exclusive responsibility for the country's wheat imports, which stand at 6 million mt for MY 2022-23. Its most recent tender closed on March 13, when traders said OAIC bought around 500,000 mt at $312/mt CFR Algeria for shipment in May.

Iran

Like in Egypt, Iran's shortage of currency reserves has left fully-loaded ships floating at the ports. Shippers are holding more than half a million mt of Russian wheat in this way while they await payment. Even so, Russian exporters still sold to the Government Trading Corporation of Iran in a March 1 tender, traders said.

Iran imported a record 7.3 million mt of wheat in MY 2021-22, as the third most populous nation in the Middle East sough to make up for the domestic production that was lost through drought. The country's output ranged from 12 million-15.5 million mt in the previous 10 marketing years.

Saudi Arabia

The kingdom has become a more significant customer for the Black Sea market in MY 2023-23 with the USDA predicting import growth of 47%. That will be largely due to much larger purchases by the state grain board, whose two most recent tenders represent two of the year's biggest single purchases in the grain market.

In both cases, the board bought more than 1 million mt of milling wheat which was twice the quantity originally sought.

The most recent of those tenders was on March 13, when Saudi Arabia made its first purchase for MY 2023-23, paying an average of $316.86/mt CFR for 12.5% protein wheat to arrive in July and August.

That is significantly later than in in the previous season, when the state grain board began its purchases of the new crop significantly earlier, holding its first tender for the 2022 crop in December 2021.

The USDA recently raised its estimate for Saudi Arabia's MY 2022-23 imports to 4.5 million mt saying that the government's large tenders showed it was building up stocks.

Russia has been the kingdom's primary supplier, providing almost 2 million mt of its MY 2022-23 imports.

Jordan

Jordan's Ministry of Industry and Trade holds a tender as often as once a week, distributing its purchases throughout the year and canceling frequently. It held 10 tenders in the last four months of 2022 and canceled most of them.

MIT was th e first state grain buyer in the Middle East to begin buying wheat for the marketing year 2023-24: on Feb. 21, it agreed to pay $333/mt CFR Aqaba for 12% protein wheat shipped in the first half of July. It has bought twice since then on March 7 at $313.5/mt and on March 14 at $309.75/mt both for shipment in the first half of August.

*US Department of Agriculture forecast

**Completed tenders as of March 14