Algeria has just placed an order to purchase wheat for nearly 500,000 tons from Mexico. This acquisition, which aims to build up the country’s grain reserves in the context of the global crisis, was made at an exceptionally high price. Details.
Algeria announces that it has wheat reserves that can meet its needs for the next 8 months. However, its latest outings on the world market to acquire enough wheat and the shortages of semolina recorded in the country suggest otherwise.
After having bought 600,000 tons of French wheat last March at a price of 485 dollars per ton (C&F, Cost, and freight), a record level, Algiers has just turned to Mexico for the acquisition of nearly 500,000 tons of this cereal.
The operation was concluded, according to the media, by the Algerian Interprofessional Cereals Office (OAIC) with Mexican suppliers for deliveries in three installments spread between mid-May and the end of June. Algeria, which traditionally imported its wheat from France until 2020, before diversifying its sources by focusing in particular on Russia, in the wake of diplomatic tensions with Paris, is expanding its sources of supply in a global context of tension on wheat.
If this operation is part of securing the country’s wheat supplies, covering two tranches of 230,000 tonnes and 250,000 tonnes, it is marked by the record purchase price. Indeed, according to the available data, Algiers acquired these tranches at the respective price of 570 and 590 dollars per ton, transport costs included, according to the Algerian media.
Even if the freight between Mexico and Algeria is much higher than that between France and Algeria, this price remains very high compared to the previous record set last March (485 dollars/ton, transport costs included), while the price of wheat is currently trading on the Euronext around 400 euros. This high price would show that Algiers urgently needs to rebuild its “safety stock” of wheat. As a result, the authorities obtain supplies on the market for deliveries at relatively short notice at naturally very high prices.
The numerous assurances from the Algerian authorities have never been convincing, especially since Algiers has always been careful not to clearly indicate stock levels while semolina shortages are commonplace.
Recall that wheat prices have soared since the outbreak of the Russia-Ukraine war, the two countries providing 30% of the wheat traded in the world. As for Algeria, it is one of the largest wheat importers in the world. With an average consumption of around 11 million tonnes per year, the country imports 60% of its needs.
In 2021, Algeria ranked 7th among wheat importers in the world with 7.7 million tonnes imported. And for this year, the volume imported should grow a little more because of the drought that is raging in the sub-region.
