Egypt Backs Down on Wheat Import Rules After Trader BoycottBy , , and
Egypt will hire an international company to inspect wheat
GASC likely to issue another tender, says Solaris Commodities
Egypt canceled its zero-tolerance policy for a common type of fungus in wheat imports, promising a return to international standards after three failed tenders.
The world’s largest wheat buyer will allow cargoes containing up to 0.05 percent of ergot, which is considered harmless in trace amounts, the Agriculture Ministry said on Wednesday. Traders boycotted Egypt’s tenders after the country reinstated a ban on the fungus and rejected cargoes.
Wheat prices rebounded, with benchmark futures gaining 0.3 percent to $4.07 a bushel by 11:35 a.m. in Chicago.
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.
“We will now see another tender from GASC and this should garner a few offers," Swithun Still, director of Solaris Commodities in Morges, Switzerland, said by e-mail. "Maybe not as many as before as some will remain skeptical that this is a permanent change.”
The government will hire an international company to inspect imported wheat, according to Essam Fayed, Egypt’s minister of agriculture, without naming the firm. That’s a change from the current system that involves sending out a government committee to the country of purchase.
Egypt turned away at least two cargoes in the past month, including shipments from Romania and Russia. About 540,000 tons of wheat were prevented from entering Egypt due to the ban on ergot, according to the Supply Ministry.
The country has grain stockpiles to last almost five months, it said.
Now with the restrictions eased, Egypt’s General Authority for Supply Commodities needs to buy wheat for its subsidized bread program and will return to the market soon, according to Andrey Sizov Jr., managing director at SovEcon, a Moscow-based agriculture consultant. However, there may be fewer offers at first and traders will ask for a premium of $10 to $15 a ton, he said.
“No one can ignore the world’s biggest market,” said Sizov. “This will support prices on European exchanges and on the Black Sea cash market.”
On Friday, wheat for loading at Black Sea ports had dropped to a one-month low of $167 a metric ton, according to the Institute for Agricultural Market Studies in Moscow.
"GASC needs wheat to get in, as I understood their stock is getting fairly low,” Jerome Sorrel, a ship broker at Pelagos shipping agency in Croissy-Sur-Seine, France, said by e-mail. “Russians also need to get stock out from their ports. The wheat market needs GASC to get back into the game.”
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