Egypt Reverses Policy on Wheat Fungus After Canceled Tender

  • Tender canceled yesterday sent a signal to Egypt: Stefan Vogel
  • French cargo rejected because it had more than 0.05% ergot

Egypt’s Agriculture Ministry loosened rules on the amount of ergot fungus allowed in wheat shipments after confusion over its policy forced the country to cancel a grain tender on Tuesday.

The world’s biggest buyer of wheat will accept shipments with up to 0.05 percent ergot, a potentially toxic fungus, according to Eid Hawash, an Agriculture Ministry spokesman. He had previously said the country would reject cargoes found with any ergot, a ban that many industry representatives called unrealistic.

The new rules bring Egypt back in line with international standards and may ease confusion among traders over shipping requirements. Authorities had rejected a French cargo over ergot levels and the state-run buyer was forced to cancel a grain tender on Tuesday because no one offered to sell.

“The tender cancellation yesterday sent quite a bit of a signal to Egypt,” Stefan Vogel, head of agricultural commodity market research at Rabobank International in London, said by phone. “They’re acknowledging now the fact it’s really difficult for traders to comply with zero tolerance.”

French Cargo

The French vessel was turned away because it tested above 0.05 percent ergot, Hawash said. The cargo was sold by Bunge Ltd., according to two people familiar with the matter who asked not to be identified because the information isn’t public.

“We’re committed to the Egyptian specifications and rules when it comes to wheat imports, which means we accept ergot levels up to 0.05 percent,” Hawash said by phone.

Egypt’s actions in the market are closely watched because the government spends billions of dollars on grain a year to subsidize bread for its citizens. Political unrest partly related to high food costs toppled two presidents in the past five years.

Confusion over Egypt’s wheat requirements had spread through the market after officials gave contradicting statements. The Agriculture Ministry said in January that no ergot would be allowed, even though the General Authority for Supply Commodities maintained the acceptable level was 0.05 percent and hadn’t changed.

Traders shunned the tender yesterday because it was too risky given the stringent requirements, according to Swithun Still, director of Solaris Commodities in Morges, Switzerland. Traders at four companies who participate in the deals said they would be reluctant to offer wheat in the future unless the country clarified its ergot rules.

Given the statement from the Agriculture Ministry today, it’s likely that business will return to normal, said Vogel of Rabobank.

Before it's here, it's on the Bloomberg Terminal.