Cutting Out the Middleman

Egypt is buying 480,000 tonnes of wheat from Russia.

What is interesting here is not the purchase, given the bumper crop in Russia, and the impediments to Ukrainian grain exports, this was forseeable.

What IS interesting though is that Egypt has done so with a direct payment, eschewing the traditional commodities traders.

It is a smart move by Cairo.

Egypt's state grains buyer bought about a half a million metric tons of Russian wheat in a private deal, four traders told Reuters, succeeding in negotiating lower prices than those offered in the more traditional tenders.

One of the world's biggest importers of wheat, Egypt last year started shifting towards direct purchases instead of tenders after the war in Ukraine disrupted its buying.

The General Authority for Supply Commodities (GASC) bought about 480,000 metric tons of Russian wheat from trading firm Solaris on Friday, at a price of about $270 a ton on a cost and freight basis (C&F), the traders said.

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Last year Egypt's supply minister said purchasing directly from suppliers enabled it to negotiate better prices at times of uncertainty.

Governments purchasing directly from suppliers will result in better prices most of the time, because you don't have a trader extracting a rent.