Exclusive: Egypt’s new wheat requirement could delay supplies
A farmer harvests wheat in a field in Qaha, El-Kalubia governorate, northeast of Cairo, May 5, 2015. REUTERS/AMR ABDALLAH DALSH
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CAIRO/ABU DHABI: Egypt, the world’s largest purchaser of wheat, has imposed restrictive import requirements, an agricultural authority official told Reuters, alarming traders who threatened to boycott tenders for the politically sensitive commodity.

The new requirement – for a complete absence of ergot, a common fungus found in grains – could disrupt the country’s supply chain for bread, traders said.

Wheat is a strategic commodity that has triggered mass riots during even marginal price rises.

President Anwar Sadat triggered riots when he cut the bread subsidy in 1977. And when Egyptians rose up against autocrat Hosni Mubarak’s rule in 2011, one of their signature chants was “Bread, freedom and social justice”.

Egypt’s state grain buyer, General Authority for Supply Commodities (GASC), allows for a 0.05 percent ergot level, but the agricultural quarantine authority said all incoming shipments above zero would be barred.

“Any wheat that we inspect that has any level of ergot will be rejected. I am obliged to do this as it would be very harmful if any level of contamination reached plants in Egypt,” the head of the central administration of the agriculture quarantine authority, Saad Moussa, told Reuters.

However, GASC said on Wednesday the new ergot requirement was under discussion and that it had not yet changed its tender specifications. Any changes would be announced before the next tender, it said.

But GASC has also said a cargo of French wheat was rejected late last month at an Egyptian port for having marginal traces of ergot.

“With a zero percent ergot rule, no trader would bid in a tender, it would be too risky to make an offer. It is impossible to guarantee zero ergot,” a European trader said.

Both European and Egyptian traders told Reuters they would not participate if the new requirements are applied to upcoming GASC tenders.

“This is something that is impossible to do. There are always traces of (ergot)…It’s clear that no one would bid in a tender like that,” one trader said.

DELAYED PAYMENTS

The new import requirement is the latest obstacle for suppliers to the Egyptian market, who have recently faced delays in letters of credit from GASC and who, in turn, have stalled their shipments to Egypt until they are guaranteed payment.

On Wednesday GASC said the latest delay in letters of credit, which has kept 180,000 tonnes of French wheat parked at a northern France port, was not related to a shortage of foreign currency, and that the letters of credit would be issued today.

An acute shortage of foreign currency has made opening letters of credit more difficult, crippling import activity, slowing manufacturing, and hampering Egypt’s economic recovery after years of political turmoil.

“Suppliers will receive today all the numbers for the letters of credit which were delayed due to administrative issues. It has nothing to do with liquidity,” GASC Vice-Chairman Mamdouh Abdel Fattah said.

When state tenders are awarded, the firm selling the commodity asks for a letter of credit, or guarantee of payment, from one of Egypt’s state-owned banks, which is then confirmed with its own bank.

Currency reserves have roughly halved to $16.4 billion from around $36 billion before the 2011 uprising that toppled Mubarak.

The country has prioritized its dollars for strategic goods like petroleum and wheat, but some traders have nonetheless experienced delays receiving letters of credit for supplying goods to Egyptian state buyers like GASC.

Traders universally expressed frustration with the mounting obstacles to doing business with Egypt, and said the issues could collectively disrupt the country’s supplies.

“GASC is acting unwisely in the ergot issue as they already have enough problems with delays in opening (letters of credit) without introducing other issues into their supply chain which could cause disruption,” one trader added.

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