Egyptian and Libyan Buyers to Learn More about U.S. Wheat Quality, Reliability

ARLINGTON, Virginia – Government officials and executives with trading and flour milling companies from Egypt and Libya are traveling in the United States Sept. 5 to 14 to learn about the U.S. wheat production and marketing system and to strengthen commercial relationships with the U.S. wheat industry. The visit is sponsored by U.S. Wheat Associates (USW), the Foreign Agricultural Service (FAS) of the U.S. Department of Agriculture (USDA) and the Kansas Wheat Commission.

“Because each country must import wheat, both Egypt and Libya make it a policy to provide bread for their people at a very low cost,” said Hesham Hassanein, regional marketing and special projects manager with the USW regional office in Cairo, Egypt. “We want to help prove to both government officials and private buyers that they can rely on the United States as a wheat supplier by demonstrating first-hand the distinctive qualities of U.S. wheat and by building trust in the U.S. supply chain and inspection procedures.”

The members of this team are all directly involved in wheat buying or flour milling. The team includes the newly appointed head of Egypt's Central Administration of Plant Quarantine which is responsible for certifying the acceptance of incoming grain cargos. The team also includes the owner and general manager of an Egyptian trading and flour milling company with annual trading volume of more than 1.2 Million Metric Tons of wheat. The Libyan members of this team include two general managers of major private milling companies operating at the east side of Libya with combined daily milling capacity of 1,600 Metric Tons.

Although Egypt is the world's largest wheat importer, the amount of U.S. wheat purchased each year can vary greatly. The landed cost of U.S. wheat is often higher than wheat from the nearby Black Sea region but Hassanein said quality is also important to both private and government importers. In Libya, the complicated public-private wheat acquisition and subsidy system present similar challenges and opportunities. Libya has only purchased significant quantities of U.S. wheat in two of the past 10 years, but the interim government is trying to stabilize the country and feeding its people is a priority. The key to competing in these important markets, Hassanein said, is to constantly emphasize the value elements associated with U.S. wheat and the unique features of the U.S. grain marketing, inspection and quality assurance systems.

The team will start its visit with a briefing by USW staff and representatives from local wheat industry organizations at the USW Headquarters Office in Arlington, VA. After private meetings at the Egyptian and Libyan embassies, the team will learn about world wheat supply and demand and USDA’s Federal Grain Inspection Service (FGIS). Meetings with private wheat exporters at the North American Export Grain Association rounds out the team’s Washington, DC, visit.

The team then travels to New Orleans, LA, to observe grain inspection and ship loading at an export elevator. In Kansas City, MO, the officials will see how U.S. wheat prices are discovered at the Kansas City Board of Trade and learn more about the integrity of U.S. wheat inspection at the FGIS Technical Center. In Manhattan, KS, the team will get more information on wheat production and uses from the Kansas Wheat Commission, Kansas State University’s International Grains Program and AIB International.

USW is the industry’s market development organization working in more than 100 countries. Its mission is to “develop, maintain, and expand international markets to enhance the profitability of U.S. wheat producers.” The activities of USW are made possible by producer checkoff dollars managed by 19 state wheat commissions and through cost-share funding provided by USDA’s Foreign Agricultural Service. For more information, visit www.uswheat.org or contact your state wheat commission.

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2012 Egyptian-Libyan Trade Team - Team Members

Mr. Beshay Marzouk
Chairman, Horus Trade Company, Cairo, Egypt

Dr. Mohamed Refaat Rasmy
Head of Central Administration of Plant Quarantine, Central Administration of Plant Quarantine, Ministry of Agriculture, Cairo, Egypt

Mr. Nagi Altabuli
General Manager, Al-Abiar Flour Mill Company, Benghazi, Libya

Mr. Farag El Baraesi
General Manager, Aljoda Alfaika Flour Mill, Salog, Libya

Mr. Ahmed El-Bira
Manager, FARMCO, Benghazi, Libya (self-sponsored)

Mr. Hesham Hassanein
Regional Marketing and Special Projects Manager, USW/Cairo

USW and USDA Ensure Access for U.S. Wheat in Egypt

The critical need for stable supplies of subsidized bread, vital to political stability in Egypt, also creates a very price inelastic wheat market. In recent years, U.S. wheat sales had fallen as Egypt imported lower-priced Black Sea wheat. Then, the Russian ban on wheat exports that followed their 2010 drought created an opportunity for increased U.S. wheat sales. U.S. wheat exports to Egypt reached 4.0 million metric tons (MMT) in crop year (June-May) 2011, valued at nearly $1.2 billion. Egypt was the top destination for U.S. wheat that year for the first time since 2004. This year, the 2010 scenario is expected to play out again due to wheat crops devastation in both the Black Sea region and parts of Europe.
Yet, it was USW, FAS, Animal and Plant Health Inspection Service (APHIS) and FGIS that laid the groundwork and removed barriers that enabled this trade growth.

USW staff at its regional office in Cairo utilizes Foreign Market Development program and Market Access Program funding to provide trade and technical service and respond to issues quickly. For example, working with other FAS cooperators, including the U.S. Grains Council and the United Soybean Board, USW co-sponsors grain-buying seminars to help government and private buyers extract the most value possible from U.S. grain import tenders.

In April 2010, Egypt’s Central Administration for Plant Quarantine (CAPQ) imposed a zero tolerance on Ambrosia (ragweed) seeds in wheat. This raised the risk of rejection of shipments, so USW and FAS/Cairo, working with APHIS, intervened with the Ministry of Trade and Industry (MOTI) to obtain a more favorable treatment for U.S. wheat. The General Authority for Supply Commodities (GASC) — Egypt’s state wheat buyer that accounts for 60 percent of the 10 MMT in wheat imports) — removed the requirement that USDA/APHIS certify that shipments are free of Ambrosia, which APHIS could not legitimately certify, while leaving in place their general requirement for other origins. CAPQ was also convinced to permit sieving of U.S. wheat shipments for Ambrosia when detected instead of outright rejection.

Such inter-governmental issues still created perceived risks for private U.S. exporters who remained reluctant to bid on open wheat import tenders from Egypt. USW responded by working with FAS and other agencies to arrange an Egyptian Government Technical Team trip to the United States to demonstrate how counterpart U.S. government agencies cooperate to assure export shipments meet importer quality specifications. Following the Russian export ban, those timely efforts helped USW and FAS/Cairo reinforce the value of the United States as a reliable supplier with MOTI and GASC. With information from USW and other organizations, FAS/Cairo worked to resolve other issues including a fumigant residue problem involving $45 million worth of U.S. wheat.

These actions all greatly facilitated access to the Egyptian market and GASC began regularly tendering for U.S. wheat including hard red winter (HRW) grown in the Plains states, soft red winter (SRW) grown in several states mainly east of the Mississippi River and soft white (SW) wheat grown in the Pacific Northwest. Total U.S. wheat sales to Egypt in crop year 2011 represented a 2.2 MMT increase over the five-year average, valued at $638 million. That compares to an annual approved program budget for wheat export development in Egypt of about $250,000.

U.S. Wheat Sales to Egypt by Class

1,000 Metric Tons

Crop Year (June - May)	HRW	SRW	HRS	White	Durum	Total
2012/13	57.7	73.3	0.0	0.0	0.0	131.0
2011/12	172.5	775.3	0.0	62.3	0.0	1,010.1
2010/11	2,612.9	743.2	149.6	515.4	0.0	4,021.2
2009/10	0.0	423.6	32.0	0.0	0.0	455.6
2008/09	0.0	1,910.4	18.0	0.0	0.0	1,928.4
2007/08	247.7	3,026.1	0.0	57.5	0.0	3,331.3
2006/07	0.0	1,264.2	8.4	818.9	0.0	2,091.5
2005/06	181.0	175.8	66.4	813.2	0.0	1,236.3
2004/05	318.8	569.6	120.7	942.6	0.0	1,951.6
2003/04	1,416.0	875.8	9.7	1613.3	26.1	3,941.0
Data current through August 26, 2012
Source: USDA - FAS - Weekly Export Sales Report

USW Helping Libya Change Standards to Encourage U.S. Wheat Exports

The North African nation of Libya is a fairly large wheat export market with the potential to grow. Soon after U.S. and international sanctions against Libya were lifted eight years ago, private flour millers were able to gain a foothold and Libya imported more than 340,000 metric tons of U.S. wheat. Over time, however, wheat import standards grew more unrealistic and the government-controlled purchasing system grew less transparent so private U.S. wheat exporters essentially stopped bidding on Libyan wheat tenders because there was too much risk. USW’s efforts leading up to the start of the revolution in March 2011 were focused on helping the government supply chain understand how U.S. hard red winter (HRW) and durum have intrinsic value for the Libyan market and counseling the importers from both the government and the private flour milling industry on the need to revise their wheat specifications to be more commercially acceptable.

After the long civil war and the toppling of the old regime in February 2012, Libya is still unstable and many of the country's institutions are not functioning properly. The interim government is struggling and there are still major security issues especially with the armed militia groups controlling most of the country. However, the government recognizes the importance of food security and, more specifically, the need to keep subsidizing both the bread and pasta to feed its people. The existing government agencies involved in setting wheat standards as well as buying wheat and flour have been directed to modernize and update Libyan wheat purchase specifications to be more in line with international practices, and appear genuinely interested in reorganizing purchases in ways that will encourage greater participation by U.S. wheat exporters.

USW hopes that this trade team experience will help the Libyan wheat buyers better understand how U.S. farmers, and grain handlers maintain quality and how the Federal Grain Inspection Service certifies that quality.