EGYPT’S WHEAT TENDERS – A PUBLIC NOTICE BOARD FOR BLACK SEA GRAIN NOTATIONS?

Egypt, the world’s biggest wheat importer, is the largest market for Black Sea wheat exports. Half of Egypt’s wheat imports are purchased by its government’s General Authority for Supply of Commodities (GASC), employing a tender system. Based on a unique data base of GASC tender prices, the price relationships between the GASC tender and Black Sea wheat exporters (Russia, Ukraine, Romania and Kazakhstan) and also France and the USA are investigated. Results of linear and threshold vector error correction models suggest that export prices in the Black Sea region continuously and rapidly adjust to GASC tender prices, while the GASC tender price only adjusts to the French export price. Obviously, the GASC tender price has the function of a wheat world market price in the Black Sea region. Also, the GASC tender system creates strong price competition between the Black Sea exporters and France. We trace this back to the fact that the GASC tender system enhances transparency about competitive prices of the Black Sea wheat market, where an effective price discovery mechanism is still missing