Egypt rejected a cargo of Canadian wheat for a second time due to a dispute over the level of ergot fungus, deepening a standoff with traders now reluctant to sell the grain to the world’s largest importer.
Quarantine officials at the Ministry of Agriculture turned away the 8,000 metric ton cargo again after a first rejection earlier this month, according to a Cairo-based trader familiar with matter who asked not to be identified as information isn’t public. The supplies met the acceptable levels of ergot, a naturally occurring fungus, the trader said.
Egypt stumbled in a standoff with international traders after it rejected a vessel carrying French wheat supplied by U.S. agribusiness company Bunge Ltd. The nation, which provides subsidized bread for its 88 million people, has since then struggled to buy and canceled three tenders in the past two weeks because there were too few offers or high prices.
Egypt Rejects Canadian Wheat Over Fungus Levels
Costing a Fortune
"If rejections continue, prices will skyrocket," said Hesham Soliman, the president of Medstar for Trading in Alexandria, Egypt. "I have a small cargo en route to Egypt now and I had for the first time to pay insurance against rejection. Imagine if this is the case with larger cargoes? It will cost me a fortune."
Egypt is struggling to get traders to participate in its tenders due to confusion over what levels of ergot are acceptable. The Agriculture Ministry said last month it would turn away grain containing any ergot, even as the state-run buyer General Authority for Supply Commodities, or GASC, said it would accept levels of 0.05 percent, in line with world standards. The ministry has since reversed its stance.
The Canadian cargo was first rejected in early February after visual inspection at the port in Abu Qir, the trader said. It was barred again by officials even after three independent tests carried out by the seller found ergot levels at 0.005 percent, according to the trader.
A spokesman for the Agriculture Ministry didn’t answer phone calls seeking comment. The authority saidit turned the cargo away the first time earlier this month.
"Traders now need the government to issue written documents that clearly states the tolerated ergot level is 0.05 percent," Soliman said. "They have said verbally in public then why aren’t they willing to write it down?”
Sellers charged Egypt the highest premium so far this season in a tender Sunday, prompting the nation to cancel the request for purchases. The lowest offer for French grain was $14.77 a ton more than the price for loading at the port of Rouen, the biggest premium since the season started in July, Bloomberg calculations showed. The nation got four offers Sunday, down from the usual 10 to 20.
"Every restriction you impose on sellers will have a price, so Egypt will have to pay more," Hakan Bahceci, chief executive officer of Hakan Agro, said by phone from Dubai. "It’s a buyers’ market, but still nobody wants to take the risk."