Egypt’s Rejection of Russian Wheat over Ergot Creates Latest Supply Hitch

Egypt may have to import more wheat – and at higher prices – as problems from payment disputes to a fungus-tainted cargo disrupt supplies to one of the world’s top importers.

Egypt has rejected a Russian wheat cargo for excessive levels of the common grain fungus ergot, said an agriculture ministry spokesman, the latest of several cargoes recently held back.

The 63,000-tonne cargo, sold to state grain buyer GASC, contained 0.06 percent ergot, just above the 0.05 percent limit permitted according to Egypt’s state tender rules, spokesman Hamid Abdel Dayim said.

A source at the company responsible for the cargo said the wheat was in line with tender specifications.

For Russia, Egypt is the largest and the most important wheat market. Russia’s agriculture safety watchdog will send a team of specialists to Egypt to examine the situation on June 2, Interfax news agency reported, citing its spokeswoman Yulia Melano.

Russia has samples of wheat sent to Egypt, she said, adding that “we are sure that the product, which was sent, meets Egypt’s requirements.”

Egypt has in recent years baffled traders by applying tough import standards, most notably a zero tolerance level for ergot, which it later scrapped for the more internationally accepted 0.05 percent content level after major suppliers shunned state tenders.

Egypt’s top administrative court this week backed the international standard favoured by suppliers, freezing a lower court order that would have reinstated the total ergot ban.

Difficulties in doing business including tough inspections have prompted traders to add hefty premiums that total hundreds of thousands of dollars to offer prices in state tenders, premiums they say are necessary to hedge against the risk of doing business.

The rejected cargo is the fourth shipment halted in recent weeks, though the first to be rejected for ergot. The cargoes amount to about 250,000 tonnes of grains that GASC may now have to tap world markets for.

Supply Minister Ali Moselhy told Reuters last week that two cargoes contracted with Dubai-based trader AOS had never arrived.

Moselhy said a third AOS shipment was seized at an Egyptian port, and a port official said the wheat was now being held amid a payment dispute, though the company declined to comment.

Dayim said the agriculture quarantine service, a body that has strictly enforced ergot rules in recent years, had rejected the trade company’s request to re-test the contaminated shipment.

The quarantine refusal suggests the cargo will likely have to be re-exported, but grain traders said that could prove costly and difficult as silos in the Red Sea port of Safaga where it is being held are not equipped with loading gear to re-load grains aboard the vessel.

The trade company source, who did not wish to be named, said it was still pushing the quarantine service to re-test the cargo.

“Our wheat is clean and fully corresponds to tender specifications. It was confirmed by all official entities and the inspection company at loading,” the source said.