Wheat market put off by Cairo’s flip-flop
Nation has been a headache for traders this year because of rule changes over fungus
For the second time this year, Egypt changed and then quickly reversed its import standards for wheat, leaving traders sceptical about doing business with the world’s largest buyer.
Egypt cancelled its zerotolerance policy on a common type of fungus known as ergot on Wednesday, less than a month after reinstating the ban and rejecting cargoes from Romania to Russia. Traders had revolted against the policy by refusing to offer wheat, forcing Egypt to cancel the past three tenders. Within hours of the latest U-turn, the nation told traders it will seek to buy wheat on Thursday. “Confidence has been badly hurt,” Vincent Jeannin, a trader at Al Ghurair Resources in Dubai, said by email. “Traders might be in a kind of ‘you go first’ mood.”
The country, which relies on regular wheat purchases to provide subsidised bread for its citizens, has been a headache for traders this year because of the frequent rule changes. Unnecessary and burdensome regulations will leave Egypt with more than $860 million (Dh3.2 billion) in direct costs and lost export earnings this year while its citizens pay more for their food, according to a US Department of Agriculture report in June.
The first ban came earlier this year amid a public health scare and media reports that ergot may cause kidney failure or cancer. Traders withdrew offers and in early July, officials agreed to return to international standards for ergot. It wasn’t long before shipments were being rejected again.
FAO report
A report from the United Nations’ Food and Agriculture Organisation said international ergot standards of as much as 0.05 per cent in a cargo don’t pose a threat. The fungus is considered toxic in high amounts.
Egypt turned away at least two vessels in the past month, including ones from Romania and Russia. About 540,000 metric tonnes of wheat were halted due to the ban, according to the Supply Ministry. The country’s current grain stockpiles will last about five months.
Now with the restrictions eased, the General Authority for Supply Commodities, or GASC, needs to buy wheat, according to Andrey Sizov Jr, managing director at SovEcon, a Moscow-based agriculture consultant. There may be fewer offers at first and traders will ask for a premium of $10 to $15 a ton, he said.
GASC is seeking to buy wheat in a tender Thursday, for shipment on October 21 to October 31, according to its website.