Egypt Wheat Market Thaws as Traders Come Back After Boycott

23.09.2016

Traders returned to Egypt’s wheat market after the nation eased import rules, signaling a boycott of the world’s top buyer may be ending.

In a tender on Thursday, the state-run grain buyer bought four cargoes of Russian wheat from Aston and Al Wehda, according to two traders involved in the tender, who asked not to be identified because they’re not authorized to speak to the media. It also received offers from Olam International Ltd. and Louis Dreyfus Co.

It’s the first deal after a boycott caused several previous tenders to fail. Traders had declined from offering any wheat, balking at a zero-tolerance policy for a common type of grain fungus known as ergot.

Egypt canceled the ban on ergot on Wednesday, promising a return to international standards that allow cargoes with up to 0.05 percent of the fungus. It’s the second time this year that officials have changed and then quickly reversed import standards for wheat, leaving traders skeptical about participating.

The General Authority for Supply Commodities, or GASC, delayed the tender by about three hours as it revised the terms, said traders, who asked not to be identified because they’re not allowed to speak to media.

Wheat Premium

Al Wehda sold 180,000 tons of Russian wheat at $187.11 a ton, including freight, for shipment from Oct. 21 to 31, according to the two traders. Aston sold 60,000 tons at $186.80 a ton. That price is about $10 a ton higher than Russian wheat for loading at the Novorossiysk port on Wednesday, data from UkrAgroConsult showed.

The premium is a sign of the wariness among traders about doing business in Egypt after the country rejected several cargoes this year, including vessels from Romanian and Russia, because of ergot. Under normal circumstances, GASC will often receive more than 10 offers.

Egypt, which relies on regular wheat purchases to provide subsidized bread for its citizens, has been a headache for traders this year because of frequent rule changes. Unnecessary and burdensome regulations will leave Egypt with more than $860 million in direct costs and lost export earnings this year while its citizens pay more for their food, according to a U.S. Department of Agriculture report in June.


bloomberg

Readers choice: TOP-5 articles of the month by UkrAgroConsult