Wheat, oil supply raises red flags

ETHIOPIA – Seven companies have won contracts worth 4.9 billion Br to supply wheat and edible oil to the government, with unusually large price gaps exhibited in their winning offers “because of the urgency of the supply”.

The federal Public Procurement & Property Disposal Service (PPPDS) opened the bid to buy a million tonnes of wheat three weeks ago with 10 companies making their respective offers.

By last week, PPPDS had notified all 10 of them that it had accepted their offers, both in price and quantity, but so far only six have responded that they would supply according to their offers, a total of 926,000tn of wheat for 4.6 billion Br.

The FPPDS is waiting to hear from the remaining four companies. An 11th company will supply 20,250tn of edible oil for 292 million Br.

Accordingly, Intrade Co. UK. Ltd., will make the largest supply of 300,000tn for 243 dollars a tonne, while Promising will make the second largest supply of 176,000tn for 241.86 dollars a tonne. 

Phoenix Commodities will supply 150,000tn of wheat in three equal lots for 233.26 dollars, 235.26 dollars and 237.26 dollars a tonne each.

Hakan Agro DMCC will supply 100,000tn in two lots for 234.13 dollars and 234.34 dollars. Two other companies, Olam International Ltd. and Ameropa AG have each undertaken to supply 100,000tn of wheat for 241.86 dollars and 241 dollars, respectively.

“Usually we do not award with such price gaps among bidders,” Yegezu Daba, director general of PPPDS told Fortune.

The trend was for PPPDS to award contracts to companies that are willing to make supplies based on offers of their lowest prices.

“Given the urgency, we have given the award at such prices,” Yigezu Added.

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This urgency has come following the need to mitigate the impacts of the current drought in several regions, with 8.2 million people recorded as in need of assistance.

The impact of El Niño is expected to extend into the Belg season of 2016. If these companies go on to sign the contracts, they will be expected to supply the wheat in four months.

The edible oil will be supplied by Wilmar International of Singapore, which offered 665 dollars a tonne. It was one of five companies invited to make the supply and one of three that had made offers by opening day on November 3, 2015.

Pacific Inter Link and IFFCO Felda from Malaysia had offered 677.7 dollars and 727.77 dollars a tonne, respectively. This procurement is also part of the relief effort and Wilmar is expected to make the supply in two months.

This purchase of wheat was made on behalf of Ministry of the Agriculture & Natural Resource (MoANR), which requires 400,000tn, and Ethiopian Grain Trade Enterprise (EGTE), which will take the remaining 600,000tn.

The MoANR is undertaking an assessment across the country to determine if an additional supply of grain will be required.

November 11, 2015; http://addisfortune.net/articles/wheat-oil-supply-raises-red-flags/

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