Boycott of Top Wheat Market Pressures Egypt to Loosen Rules

  • State-run buyer canceled tender because no traders offered
  • ‘What’s the point of participating?’ Trading House asks

After three failed attempts to buy wheat, Egypt is under pressure to loosen its rules for grain imports or face an extended boycott from international traders.

Egypt’s state-run buyer had to cancel a tender on Monday as trading firms refused to participate after the country reinstated a ban on a common type of fungus known as ergot and rejected cargoes. Authorities are now reviewing their policy on ergot in wheat shipments, according to a government official, who asked not to be identified because the talks are private.

“They will probably return to the terms that existed before,” said Vadim Sarkisov, director of Russia’s largest grain exporter OOO Trading House RIF, by phone from Rostov-on-Don.

Egypt is closely watched by the grain market because it buys more wheat than any other country to supply a subsidized bread program. Officials have gone back and forth with regulations over ergot this year, sowing confusion in the market and leading to fewer offers and higher prices at the tenders.

Zero Tolerance

The canceled tender was for shipment between Oct. 16 and 26. Egypt, which checks every cargo it buys at loading ports, has stockpiles to meet demand for more than six months, the Supply Ministry said Aug. 31.

“As long as there is a zero tolerance, GASC will continue to struggle booking wheat,” said Benjamin Bodart, a director at adviser CRM Agri-Commodities in Newmarket, England. “Exporters will simply not take the risk to get rejected.”

Egypt turned away at least two cargoes in the past month, including shipments from Romania and Russia.

The trading dispute is now hurting export prices in Russia, the world’s top supplier. Wheat for loading at Black Sea ports dropped to a one-month low of $167 a metric ton on Friday, according to the Institute for Agricultural Market Studies in Moscow.

Ergot is a naturally occurring fungus that is considered to be harmless in trace amounts, but toxic at high levels. International standards allow for up to 0.05 percent of the fungus in wheat cargoes, but banning it entirely is very difficult, said Sarkisov of Russia’s Trading House.

“What’s the point of participating if the wheat we offer has a percentage of ergot, even if it’s microscopic?” Sarkisov said. “We will look for other markets.”

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