Egypt’s ouster of Nomani Nomani as buyer of more than 5 million metric tons of wheat a year on world markets put a spotlight on a role that brought stability to the task of feeding the nation’s 80 million people.
Nomani, 58, who worked at the General Authority for Supply Commodities since 1979 and took over as vice chairman under the government of former President Hosni Mubarak, said in an interview yesterday he became an adviser to Supply Minister Bassem Oda on the planning and purchase of commodities. Mamdouh Abdel Fattah, 57, a colleague at GASC who joined the authority in 1981, replaced him.
“What this person does is critical to the Egyptian political stability,” Hani Sabra, an analyst at Eurasia Group, a political risk and research company, said by telephone from New York yesterday. “You have tens of millions of Egyptians dependent on subsidized bread. The country will collapse politically if there is no access to bread.”
The government that came to power after the 2011 uprising against Mubarak is making changes at key ministerial posts as it contends with a growing budget deficit and negotiations to secure International Monetary Fund financing. The authority helps provide subsidized bread in a country where 25 percent of the population lived below the poverty line in 2011, according to state figures.
Bread Program
The $2.5 billion a year program provides 80 billion round loaves at less than one U.S. cent apiece, a daily average of about three per person, the Department of Agriculture in Washington estimates.
The challenge for the authority is to keep buying even when prices are high and the country’s currency is at a record low. The Egyptian pound slumped 10 percent in the past 12 months to a record-low against the U.S. dollar as Chicago wheat prices advanced 14 percent over the same period. The central bank’s reserves are down more than 60 percent since the 2011 uprising.
GASC may import between 3.8 million and 3.9 million tons in the 12 months starting July 1, Nomani said in an interview Jan. 12. Egypt’s total wheat imports will fall to 9.5 million tons in the 12 months ending in June from a record 11.7 million tons a year earlier, the USDA estimates.
The country has 3.11 million tons of wheat, enough to meet consumption for 126 days, the government said yesterday. GASC, which seeks to maintain a five month supply of strategic stocks, counts not only the wheat in the country, but also the amounts purchased that are en route to Egypt, according to the USDA’s Foreign Agricultural Service unit.
Market Mover
Nomani’s decisions on buying grain moved futures markets from Paris to Chicago, according to Arkady Zlochevsky, president of Russia’s Grain Union in Moscow. When he bought 400,000 tons of wheat from the U.S., France and Romania on Dec. 1, GASC’s first purchase from the U.S. in the season that started July 1, Chicago futures rose as much as 1.6 percent and Paris-traded wheat jumped 1.8 percent on Dec. 3. Wheat futures fell 2.6 percent in Chicago today.
“Regardless of who’s in power, Egypt relies on its subsidized bread program,” Zlochevsky said by phone on Feb. 6. “Any government that dares to give up this system will be swept away by the anger of the Egyptian people. And that’s why every government will continue to fund wheat tenders no matter the cost.”
12-Member Team
Nomani, who became vice chairman of GASC almost four years ago, ran a 12-member team that helped him decide when and how much wheat to buy based on available domestic supplies, financing and the outlook for future needs, he said during an interview in Cairo last month.
He picked the combination of factors that would benefit Egypt most and played time and origin spreads as well as competition between suppliers, Zlochevsky said. His one-time purchases could be big enough to meet Ghana’s wheat requirements for a year.
“The government saw it fit in the present time to allow me to become the adviser to the minister and allow someone else to take my position,” Nomani said in an interview yesterday at his new office at the ministry. “I will be keeping an eye on the international commodity markets in my new job, but not as frequently as I did in my former post.”
Nasser Farash, a spokesman for the Ministry of Supply, didn’t reply to a text message or answer the phone when called by Bloomberg seeking comment about the appointments.
Russian Wheat
Nomani usually bought wheat from Russia and its neighbors on the Black Sea, where traders aggressively undercut offers from other sellers, early in the season when the new crop started to flood the market.
As the grain from the region dwindled later in the season, he purchased French wheat. As those supplies started to run out, he switched to the U.S., often prompting a rally in Chicago wheat futures.
Prices jumped when he snapped up 280,000 tons of U.S. wheat on Dec. 1. U.S. suppliers winning the following three tenders lifted the futures each time.
Chicago traders watch Egypt from the moment the authority announces a request to buy until the results are known the next day. Top wheat suppliers are vying for this market, and offers in the tender signal availability across the main grain- producing countries, Shawn McCambridge, a senior grain analyst for Jefferies Bache Commodities LLC in Chicago, said by telephone Feb. 5.
Market ‘Perspective’
“Egypt gives you a snapshot right now, value-wise, of what the market is thinking,” McCambridge said. “It gives us perspective on price and perspective on who’s active in the trade and perspective on what’s going on in the world market. They’re very open as far as what’s been offered, when nobody else is very transparent.”
If traders aren’t offering wheat from Russia or another country in a GASC tender, it usually means that the country may have reached its maximum shipment capacity for the season, McCambridge said. In the last purchase he ran on Feb. 2, Nomani picked Egypt’s biggest private trader Venus International to supply 60,000 tons of U.S. wheat, from a total of seven offers including multinational traders from Glencore International Plc (GLEN) and Cargill Inc.
The tender was dominated by the soft red winter wheat, the variety traded on the Chicago Board of Trade, with only one offer of French grain. A request on Jan. 10 drew 14 offers, including three French and one Canadian. In the tender yesterday, managed by Fattah, all the wheat came from the U.S.
Consumption Surges
Egypt’s wheat consumption has surged 39 percent in the past 10 years, outpacing a 32 percent increase in output and making the country rely on imports for half of its use, the USDA data show. Egypt’s population grew 18 percent between 2006 and 2012 census, government data show.
When Nomani first took the job at GASC in July 2009, he began importing higher quality wheat from more suppliers. Adding Romania and re-including Ukraine on GASC’s list of approved wheat sources helped Egypt by increasing competition between suppliers, according to Zlochevsky.
The government’s worsening financial situation will be “the primary restraint” for GASC’s wheat purchases, the USDA’s Foreign Agricultural Service unit said in an April 2 report. Egypt received a $1.2 billion credit facility with the International Islamic Trade Finance Corp. to help fund purchase of fuel and wheat.
Bloomberg
