Egypt Scraps Wheat Tender as Traders Balk at Stricter Rules

Updated on
  • Egypt said to cancel wheat tender after receiving only 1 offer
  • ‘Egypt’s tender is becoming a lottery:’ Al Ghurair trader

Egypt, the world’s biggest buyer of wheat, canceled a tender to buy grain as traders balked at new requirements banning a certain type of fungus.

The General Authority for Supply Commodities scrapped today’s tender after receiving only one offer from Venus International, according to two traders familiar with the matter. By comparison, Tunisia, which buys seven times less wheat, received offers from 13 companies in a separate tender today, said a trader, who asked not to be identified because the negotiations are private.

Egypt announced over the weekend that they would no longer allow grain with any traces of ergot, a naturally occurring fungus that is toxic in large amounts, citing concern it’s dangerous to the local wheat crop. The new ruling is more restrictive than international standards and Egypt’s previous policy, which permitted shipments containing as much as 0.05 percent of the fungus.

"Egypt’s tender is becoming a lottery," said Vincent Jeannin, a trader at Al Ghurair Resources in Dubai. "Will your vessel pass or not?"

The country has 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. Egyptian official have rejected shipments from traders including Bunge Ltd. and Al Wehda for containing too much of the fungus.

Egypt is central to the wheat market because it buys grain to subsidize bread for more than 90 million citizens.

Venus offered to sell 55,000 metric tons of Ukrainian wheat at $179.32 a ton, the traders said. In last week’s tender, seven companies were willing to sell and the state-run grain buyer purchased three cargoes of Russian wheat.

A separate tender in Tunisia, a much smaller player in the world market, attracted offers from 13 companies and resulted in the purchase of 50,000 tons of wheat in a tender for 134,000 tons, according to a trader familiar with the process who asked not to be identified as information is private. Dutch grains trader Nidera sold the grain at $178.75 a ton.

"This shows that suppliers prefer clear terms," said Swithun Still, a director at Morges, Switzerland-based Solaris Commodities SA. "I would expect that Egypt will amend their terms to the previous 0.05 percent as a result of today’s solitary offer."

Egypt’s decision to ban ergot was made after the Agriculture Ministry formed a committee last month to investigate the risks posed by the fungus. The group analyzed wheat imports over the past 10 years and recommended buying grain from regions where the grain didn’t contain ergot, including Ukraine, Russia, Latvia and Lithuania. The review showed previous shipments from France, Canada, Poland, Romania, Serbia and the U.S. had traces of the fungus.

“It’s difficult to see where Egypt might go with this” said Amy Reynolds, a senior economist at the International Grains Council in London. ”As world’s largest buyer, they need to secure supplies and it might have a possible stalemate.”