CAIRO, EGYPT – Following three failed tenders, Egypt said on Sept. 21 that it has eliminated its zero-tolerance policy on ergot levels in wheat and has promised to follow international standards allowing up to 0.05%.
Since the end of 2015, the nation has flip-flopped its policies regarding the fungus, first allowing 0.05% and then requiring zero tolerance for ergot. The confusing and ever-changing policies regarding levels of ergot turned off traders who were unwilling to risk making contracts that could later be rejected.
The General Authority for Supply Commodities (GASC), the state-owned grain buyer, was forced to cancel three tenders, including one issued on Sept. 18, after receiving no offers. The latest tender sought cargoes of 55,000 to 60,000 tonnes of soft and/or milling wheat for shipment from Oct. 16-26.
|Paul Meyers, vice-president of commodity analysis, Foresight Commodity Services.|
“Egypt is the largest importer of wheat in the world,” Paul Meyers, vice-president of commodity analysis, Foresight Commodity Services, Naperville, Illinois, U.S., told World Grain. “When they do something like this with zero tolerance, the exporting countries are not going to respond to any tenders.”
Egypt is expected to import an estimated 11.5 million tonnes of wheat in 2015-16.
In an interview on Sept. 20 with World Grain, Meyers said initially the market had been a little bearish with E.U. wheat prices sagging a bit because of the uncertainty, but most traders expected the issue to be resolved for one simple reason: Egypt needs the wheat.
“If the market believed Egypt was going to cut back significantly on its exports, prices would be down,” he said. “The market would have reacted more to this.”
Ergot is a common grain fungus that is harmless in low quantities but may cause hallucinations when consumed in large amounts. The 0.05% ergot level is in line with the Codex Alimentarius, a collection of internationally recognized standards.
According to a report from the U.S. Department of Agriculture’s (USDA) Foreign Agriculture Service (FAS), Egypt’s trade restrictions, including the ergot policy, distort trade, hinder private initiatives and undermine innovation.
Specifically, the ergot policy may cost Egypt $55 million to $82.5 million, excluding legal costs from fighting lawsuits due to breach of contract, the FAS said. Overall, the country’s trade restrictions could cost well over $800 million, according to the report. In addition, it said export earnings may be increased and imports costs significantly reduced if the country followed international standards and best practices.
“Unfortunately, the end result is higher food prices paid by Egypt’s overburdened consumers, in complete dissonance with the government’s efforts and trumped up claims that it’s trying to make food more affordable,” the FAS said.
Egypt has imported wheat under the 0.05% ergot threshold for years, according to a report from the FAS.
“Despite being the world’s largest importer of wheat, there is no evidence that ergot has taken hold in Egypt’s wheat fields,” the FAS report noted. “This is so even in light of the fact that imported wheat is distributed from Alexandria to Aswan, as has been the case for decades.”
Egypt authorities have said its zero-tolerance ergot policy is “necessary to protect Egypt’s agricultural lands.” They said a technical committee from the agricultural research center studied the issue for three weeks before enacting the ban.
The nation’s changing ergot policies go back to December 2015 when its Central Administration for Quarantine (CAPQ) rejected a 63,000-tonne shipment of French wheat due to the presence of ergot fungus, despite being below the 0.05% threshold stipulated in the GASC tender specifications. CAPQ officials justified the rejection on the basis that Egypt’s 2001 quarantine law which stipulates zero tolerance of quarantine pests, indicating that all wheat imports must be free from ergot to protect the country’s plant health, the FAS said.
International markets responded quickly with traders refusing to submit bids on GASC’s tenders. The Minister of Agriculture then said it would again allow an ergot tolerance level of 0.05%.
But on Aug. 22, Egypt’s Minister of Agriculture and Land Reclamation Essam Fayed issued a ministerial decree that stipulated zero tolerance for ergot fungus in imported wheat shipments from all origins.