Egypt Rejects Another Wheat Cargo Amid Fungus Confusion

  • Rejection comes as Egypt is expected to clarify ergot stance
  • Market had been roiled this year after ships turned away

Egypt has rejected another wheat cargo, just as the government looked set to end confusion over how much of the fungus known as ergot would be allowed in imports.

The biggest wheat buyer turned away a 33,000-metric-ton cargo of U.S. wheat from Venus International on June 13 after finding ergot, the company’s Chairman Mohamed Abdel Fadil said by phone. Egypt made similar rejections earlier this year of French, Canadian and Polish cargoes containing the naturally occurring fungus.

That, and conflicting statements from different parts of the government over what would be permitted, roiled the wheat market and led many traders to withdraw their offers or charge higher prices. While the Cabinet this week said it backed allowing shipments containing 0.05 percent ergot -- the international standard -- a spokesman for the Agriculture Ministry today said it will apply a zero-tolerance policy until a new decree is issued.

"We were hoping the shipment would be allowed in after the Prime Minister’s decree, but that didn’t help," Fadil said. The cargo contained 0.002 percent ergot, Fadil said, citing health ministry documents.

Ministry Comments

Agriculture Ministry spokesman Eid Hawash on Thursday said he wasn’t aware that a shipment had been rejected. Yesterday, he said an official decree ordering the quarantine office to accept a level of 0.05 percent ergot was expected. Ministers of supply, agriculture, trade and health met with Prime Minister Sherif Ismail the day before to discuss wheat policy. The decree still hasn’t been issued, Hawash said.

Egypt buys massive amounts of wheat every year, both through international tenders and from local farmers, to provide subsidized bread for citizens.

"We won’t allow any shipment with the slightest trace of ergot before we receive a decree from the Cabinet instructing the ministry to apply a 0.05 percent policy,” Hawash said today.

The U.S. Department of Agriculture is engaging with Egyptian authorities to encourage them to apply international standards on ergot levels, a spokeswoman for the USDA’s Foreign Agricultural Service said by e-mail.

U.S. Sales

Egypt has imported little wheat from the U.S. in recent years, buying from Europe and the Black Sea region because of price competitiveness and improving quality, said Jay O’Neill, senior economist at Kansas State University’s International Grains Program Institute. The U.S. exported 41,798 metric tons to Egypt in the marketing year that ended June 1, compared with 386,873 tons in the prior season, U.S. Department of Agriculture data show.

Egypt’s recent rejections of European and Black Sea cargoes, as well as quality concerns for the coming crop, provided “a window of opportunity” for a U.S. sale, O’Neill said.

“I don’t see it to be a flood of new business for the U.S.,” he said in a telephone interview. “As they reject these cargoes, it’s going to make everybody very leery about selling to Egypt. The trade right now is terribly disappointed that this internal dispute and controversy still continues to take place.”

Unnecessary and burdensome regulations will leave Egypt with more than $860 million in direct costs and lost export earnings this year, while its citizens pay more for their food, the USDA estimated in a report this month. The agency cited costly tender requirements and confusion over wheat-import policies as factors.

Wheat futures for September delivery fell 1.4 percent on Thursday to close at $4.6575 a bushel on the Chicago Board of Trade, after touching a two-month low.

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