Egypt Rejection of French Wheat Cargo Raises Supply Concerns

  • Vessel was stopped because it didn't meet ergot requirements
  • Impossible to guarantee wheat without ergot, Agritel says

Egypt’s rejection of a French wheat cargo for fungus contamination is raising questions of how traders will supply the world’s biggest buyer of the grain.

A French vessel was stopped because it didn’t meet the Agriculture Ministry’s zero-tolerance requirement for ergot, a fungus that can grow on wheat and cause health problems, Eid Hawash, an spokesman for the agency, said Tuesday. The General Organization for Export and Import Control was notified by mail about a week ago, he said.

The issue is causing confusion among traders. Egypt’s General Authority for Supply Commodities, which runs international tenders to buy wheat, has allowed ergot up to 0.05 percent in the past and it’s impossible to guarantee that a wheat shipment doesn’t contain ergot, according to Michel Portier, the chief executive officer of Agritel, a Paris-based research firm.

As ergot is naturally present in wheat, maintaining the requirement means “there’ll be a lot fewer offers and prices will be higher,” Alexandre Boy, an analyst at Agritel, said in an interview on Tuesday.

The nervousness over ergot risk was reflected in the last wheat tender by the lack of offers compared to the previous ones, Swithun Still, director of Solaris Commodities in Morges, Switzerland, said by e-mail.

Wheat Cargo

The cargo of French wheat was shipped by Bunge Ltd., according to two people familiar with the matter who asked not to be identified because the matter isn’t public. The bulk vessel Amira, which left France’s port in Dunkirk on Dec. 10, has been waiting near Egypt’s Damietta port since Dec. 21, according to shipping data compiled by Bloomberg.

GASC said earlier this month that it planned to maintain the same ergot level required in the past. The agency could not be reached for a comment when contacted by Bloomberg News on Tuesday.

"Zero doesn’t exist so if they want to stop eating bread, they should set it at zero," Stephane Bernhard, head of grains trading at InVivo, said in an interview this month.

Standards Code

International food standards as agreed in the Codex Alimentarius, of which
Egypt is a member, allow for 0.05 percent ergot in wheat. The codex, which is voluntary, is recognized by the World Trade Organization as a reference for trade-dispute resolution.

Certifying the absence of ergot in a wheat cargo as large as 60,000 metric tons isn’t possible, though the risk of contamination is very small and shouldn’t be an obstacle to imports, said Xavier Reboud, a research director at France’s agronomy-research institute INRA who has studied the fungus.

The issue follows other problems in Egypt’s wheat market. Some shipments in late December and early January were delayed after a foreign-currency crunch caused letters of credit to be late, traders with knowledge of the matter said at the time.

If Egypt keeps its zero tolerance for ergot, some exporters may not offer to supply the country with wheat, Agritel said in a report earlier this month. The nation has enough wheat stockpiles to last until early May, GASC said on Jan. 22.

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