Exclusive-Egypt's new grains buyer struck rare deal for French wheat, sources say

By Sarah El Safty, Mohamed Ezz and Gus Trompiz

DUBAI (Reuters) - Egypt's state grains buyer Mostakbal Misr agreed in April to buy around 180,000 metric tons of French wheat from two top European traders, trading sources said, in a sign of growing acceptance of the new entity by global suppliers.

Mostakbal Misr bought two 60,000 metric ton cargoes from one firm and another similarly sized cargo from another, two trading sources with knowledge of the matter told Reuters, though they said delivery of the cargoes was facing delays.

The private agreement, which has not been previously reported, is one of the few instances Mostakbal Misr has been able to secure cargoes for Egypt's massive bread subsidy programme directly from global suppliers. Those suppliers have been hesitant to deal with the little-known military agency, traders say.

Egypt is one of the world's top wheat importers, buying about five million tons from abroad on average. For decades, the General Authority for Supply Commodities (GASC), a civilian agency that is part of the supply ministry, imported wheat and vegetable oils through international tenders.

Since Mostakbal Misr took over the import of major commodities in December, it has relied on local importers to act as intermediaries on purchases.

Its lack of experience dealing with global commodity traders contributed to early teething problems, said one of the sources.

"Global traders were asking for a commercial registry or a tax card so that risk departments would approve any deals with them but that was not provided," the source said. "That's why local importers came in as intermediaries."

If the deals can be successfully concluded it would mark a breakthrough for Mostakbal Misr, but the sources, both of whom spoke on condition of anonymity because of the sensitivity of the matter, said there had been delays in opening letters of credit to pay for the shipments, as well as in assigning freight to transport them.

Traders said at least some of the volume was expected to be loaded in May, and the rest in June.

The second source said the two cargoes were sold at a price of $246 per ton for immediate, "at sight" payment, while the third cargo was sold for $256 per ton with deferred payment via 180-day letters of credit.

Egypt's supply ministry and Mostakbal Misr did not respond to requests for comment.

Suppliers went ahead with the deal as a result of weak global demand, especially for French wheat which has been impacted by a spat with Algeria, the first source said.

The deal coincided with a visit by French President Emmanuel Macron to Egypt in April. Reuters could not determine if the deal was connected to the visit.

The sales to Egypt could be a boost for French wheat exports after a dire spell marked by a poor harvest and diplomatic tensions with Algeria, though the absence of any loadings in May has created uncertainty in the market over the deals.

France exports wheat only occasionally to Egypt, with its previous shipments dating back to July last year.

The European Union's biggest wheat producer generally struggles to compete against Black Sea suppliers like Russia and Romania that dominate the Egyptian import market.

But traders say a drop in French prices this year coupled with increased Black Sea prices created an opportunity.

Bulgarian wheat that Mostakbal Misr bought directly in a similar deal earlier this year was successfully shipped.

"This time is more serious than others. They are dealing with big international suppliers directly," said the second source. "We are waiting to see how this deal is going to be executed."

Mostakbal Misr is currently holding talks for the purchase of Bulgarian and Romanian wheat.

(Reporting by Sarah El Safty, Mohamed Ezz, Gus Trompiz and Michael Hogan; Editing by Aidan Lewis)