Egypt, the world’s largest buyer of wheat, has turned away two more cargoes of grain purportedly contaminated with fungus, just months after similar rejections led to confusion over import rules and roiled markets.
Cargoes totaling 40,000 metric tons of Canadian and Polish wheat were recently rejected by quarantine authorities because of contamination with the ergot fungus, said officials at the two companies that own the grain, Venus International and Five Star Flour Mills Co.
Confusion over rules governing the naturally occurring ergot, which can be toxic in high amounts, sparked an impasse with traders earlier this year after Egypt rejected some French and Canadian cargoes and made conflicting statements over the level of fungus allowed. Some traders stopped participating in Egypt’s international tenders, while others charged a price premium to account for the higher risk of shipping to the country.
“This is very worrying,” said Mahmoud El-Shorbagi, chairman of Five Star, whose 10,000-ton cargo of Canadian wheat was one of the two rejected. The vessel is sailing Wednesday to the United Arab Emirates after waiting in the port of Suez since early May.
Five Star’s cargo was found to contain 0.04 percent ergot. A second ship containing 30,000 tons of Polish wheat owned by Venus International had 0.002 percent, the company’s Chairman Mohamed Abdel Fadil said in a separate interview. That’s below the Egyptian Supply Ministry’s guideline for ergot levels of under 0.05 percent.
The confusion broke out earlier this year after some officials from another government office declared the country had adopted a zero-tolerance policy for the fungus.
“There’s a huge risk now,” Fadil said. “We have two different entities working under two contradicting laws. We need a clear policy.”
Egypt canceled three international tenders earlier this year because of high prices and few offers, slowing buying to a trickle in late January and early February. Imports then accelerated again, leading up to the start of the country’s domestic harvest in April.
Shipping wheat to Egypt is risky for international traders because it’s almost impossible to guarantee cargoes are completely free from ergot, Fadil said.
“If the country continues to reject more vessels, that might be a little bit bearish to the market,” said Stefan Vogel, head of agricultural commodities research at Rabobank International in London.
Egypt, which buys local and international wheat to subsidize bread for its citizens, may have enough supplies of the grain to last for a while. The harvest is wrapping up and purchases from domestic farmers this season have reached 4.76 million tons, according to the Agriculture Ministry, more than the government’s target of 4 million tons. But the new international marketing year starts July 1, and buying may pick up some time after.
“We’re just weeks away from the start of the new season and we still don’t know what the policy for ergot is,” said Hesham Soliman, president of Alexandria-based Medstar for Trading. “Traders will charge a hefty premium because of the high risk involved.”