Egypt writes to wheat suppliers on ergot, hoping to win confidence

Abu Dhabi | Reuters — Egypt’s Agriculture Ministry sent a letter to traders saying it will allow an ergot fungus tolerance level of 0.05 per cent in wheat imports, hoping suppliers will make offers in international purchase tenders for the strategic grain.

Disputes about ergot content level have disrupted top buyer Egypt’s wheat imports in recent weeks, leaving traders wary.

The letter, seen by Reuters, was distributed by state grain buyer GASC to traders on Wednesday, issued by the office of the minister of agriculture on Feb. 15.

Egypt’s GASC cancelled two tenders and only managed to purchase a 60,000-tonne cargo of Romanian wheat in a Friday tender, with suppliers reluctant to make offers. Those who offer are adding a weighty risk premium to prices.

Egypt’s supply ministry, which includes GASC, has permitted a 0.05 per cent tolerance level of ergot in wheat imports. The agriculture ministry, whose quarantine agency checks imports, had said it would not allow any ergot content and the quarantine agency has rejected a series of shipments for ergot content.

In a bid to win back confidence, the two ministries said verbally wheat shipments can contain up to 0.05 per cent of ergot, a common global standard earlier this month.

But written confirmation of a tolerance level had been a major demand from trading companies who had declined to participate in Egypt’s international wheat tenders in past days.

“It is a positive move and what had been requested. But after such serious problems in past weeks, importers will now wait to see if the tolerance policy is applied to shipments which are arriving or have arrived in Egypt,” one European trader said.

Still, some traders said the fact that the letter was issued by the office of the agriculture minister and not by the agriculture quarantine authority presented a problem.

“Nothing has changed. We need a statement from the quarantine authority to be completely covered,” another European trader said.

“If the quarantine has a different interpretation of the issue then we are faced with risks that can’t be quantified. Even a premium of $7 to $8 a tonne doesn’t protect you if the cargo is rejected,” he said.

Documents seen by Reuters on Tuesday showed quarantine had rejected a Canadian wheat vessel of 8,000 tonnes purchased by the private sector even after comments made by the agriculture minister stating that up to 0.05 per cent of ergot was acceptable.

The quarantine authority has applied stricter measures to other commodities as well.

On Monday, trade sources told Reuters four soybean shipments were rejected in Egypt due to the presence of ambrosia seeds.

Saad Moussa, the head of the central administration of the quarantine authority, has declined to talk to Reuters since making exclusive comments on Jan. 6 about his zero tolerance policy toward ergot.

— Reporting for Reuters by Maha El Dahan, Michael Hogan and Valerie Parent.