Egypt Fungus-Wheat Ban Fuels Confusion, Higher-Price Concern

Wheat

Egypt will no longer accept imported wheat containing any traces of the ergot fungus, the Agriculture Ministry said, sowing fresh regulatory confusion that has hampered shipments to the world’s biggest buyer of the grain.

The new ruling runs counter to a less restrictive policy by the Supply Ministry allowing for shipments containing as much as 0.05 percent ergot levels. Agriculture Minister Essam Fayed announced the decree in an e-mailed statement issued in coordination with Prime Minister Sherif Ismail, the head of the ministry’s agriculture services department, Ahmed Abou El-Yazid, said Sunday at a news conference in Cairo. Ergot is a naturally occurring fungus that can be toxic in high quantities.

Repeated reversals of decisions over ergot standards have prompted Egypt to reject several shipments and led some traders to withhold offers or raise their asking prices to Egypt’s state-run General Authority for Supply Commodities.

“This will dramatically impact the market,” Hesham Soliman, president of Alexandria-based Medstar for Trading, said by phone. “Traders will now, if they decided to take the risk and participate in GASC tenders, charge much higher prices to cover the huge risk involving selling to Egypt.”

It’s not clear whether the ban, dated Aug. 22 but only announced Sunday, would be applied retroactively and therefore affect shipments previously agreed with through the authority’s state tenders. GASC Vice Chairman Ahmed Youssef didn’t immediately answer a phone call seeking clarification. Traders have long maintained that guaranteeing ergot-free wheat is almost impossible and the move means the biggest buyer of the grain may face lower or even no offers in state tenders and pay higher prices for the cereal needed to feed its population of more than 90 million.

Contaminated Wheat

Egypt’s Cabinet said in June it would back international standards that allow for 0.05 percent ergot levels in wheat. While the Agriculture Ministry then said it would abide by the Cabinet decision, its latest decree stipulates that it is now banning the import of wheat with any traces of ergot.

“It is forbidden to import wheat contaminated with ergot,” according to the decree, obtained by Bloomberg and dated Aug. 22.

The latest change in policy creates uncertainty in grain markets, said Swithun Still, a director at Morges, Switzerland-based trader Solaris Commodities SA. “Many suppliers will prefer to abstain from GASC tenders, and those who offer will probably increase prices to factor in the risk,” he said Sunday.

Rejected Shipment

The decision came after a committee formed last month by the ministry determined it was dangerous to the local wheat crop to allow imports with any amount of ergot, according to Abou El-Yazid. “I want to reassure everyone that there’s not a single grain contaminated with ergot has been allowed to enter Egypt up to this day,” he said. Of about 15 cargoes of imported wheat that have arrived recently, two were contaminated with ergot and weren’t allowed into the local market, he said.

The committee’s review of Egypt’s wheat imports over the past 10 years determined that about 2 percent of the shipments contained ergot. It recommended that the nation buys wheat from regions where past shipments showed the grain didn’t contain ergot, including from Ukraine, Russia, Latvia and Lithuania, Abou El-Yazid said.

The review showed that previous shipments of wheat from France, Canada, Poland, Romania, Serbia and the U.S. had traces of ergot, Ashraf Khalil, head of the Plant Pathology Research Institute and a member of the committee, said in an interview in Cairo.

The Agriculture Ministry’s quarantine office rejected a shipment of 7,000 metric tons of Romanian wheat because of ergot levels, Atef Makram, chief executive officer of the cargo’s supplier, Egyptian trading company Al Wehda said Sunday by phone. A shipment of Russian wheat was also rejected by the quarantine office, a person with direct knowledge of the matter said on Aug. 10, asking not to be identified because the decision wasn’t public.