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GEM CORP signs USD 175.57 mln wheat deal

GEM CORP signs USD 175.57 mln wheat deal

GEM CORP Commodities Trading SA has signed a deal to supply 900,000 metric tons of wheat at a total price of USD 175.57 million, The Reporter has learnt.

It can be recalled that GEM CORP won a large chunk of the wheat contract to supply 500,000 metric tons from the total bulk of 600,000 metric tons of wheat at a price of USD 97.07 million; whereas, the remaining 100,000 metric tons was awarded to Agro Corp for USD 19.4 million.

In this regard, Agro Corp is yet to sign a deal for the supply of 100,000 metric tons.

The latest purchase is the biggest contract to be signed under a single supply contract, so far this year. It is to be recalled that last week, GEM CORP was also awarded to supply 400,000 metric tons of wheat at a price of USD 78.5 million which brings the total supply contract award to GEM CORP to 900,000 metric tons.

As of this week, GEM CORP has managed to sign a deal for the supply of the aforementioned bulk of wheat.

The two separate bulks of 600,000 metric ton and 400,000 metric tons of wheat are purchased in behalf of the National Disaster Risk Management Commission as well as the Ministry of Trade and Industry, respectively. It will be used to assist those who are in need of humanitarian assistances as well as for market stabilization.

It can be recalled that according to a latest report released a couple of months ago, there are around 8.3 million Ethiopians in need of relief in food and cash assistance, as well as non-food assistance. From this, 8.13 million people are in need of food assistance.

The humanitarian crisis in Ethiopia seems to have remained unchanged despite a better climate condition in comparison to last year.  This is, however, due to conflict induced mass internal displacements across the country which has affected millions of Ethiopians.

When it comes to market stabilization, just a couple of months ago, the country was suffering from a wheat shortage following the lethargic procurement process and supplier’s failure to deliver wheat as per their contracts. 

As far as the latest contracts is concerned, and the fact that a large chunk of the wheat purchase was awarded to a single company; has industry sources fearing that the government is taking a high risk considering the volume and the actual track record of the company in Ethiopia or the lack thereof.

“It is very clear that it is very difficult to handle such a big quantity, especially for a first timer in the Ethiopian wheat market,” an industry source whose name was withheld upon request told The Reporter a few weeks ago.

“It may not be easy, especially for GEM CORP, to supply the 400,000 metric tons of wheat in two months’ time and again another 500,000 metric tons in another two months time,” he said.

In addition, the fact that the government is now expecting to get 1.4 million metric tons of wheat in the coming few months, is feared it is going to cause a congestion in the port of Djibouti where sources say it might be difficult for the awarded companies to perform their contractual obligations.