HAMBURG/ABU DHABI: Egypt cancelled a tender to buy wheat on Friday after receiving only four offers that were well above prices quoted in an Algerian deal this week, suggesting Cairo continues to suffer from the confusion over its import regulations.
Egypt‘s agriculture ministry shocked grain traders last month when it said it would not accept wheat containing any traces of ergot, a fungus common in wheat worldwide, after rejecting a 63,000-tonne shipment of French wheat.
After traders boycotted a tender on Tuesday, the ministry changed tack on Wednesday and said it would allow wheat imports with up to 0.05 percent levels of ergot. But the low number of offers in Friday’s tender for an unspecified amount of wheat, and the high prices quoted, suggest traders remain wary.
“We have still not received an official confirmation from the agriculture ministry that it will allow the 0.05 percent ergot tolerance level in wheat imports and this is making it too risky to offer,” one European trader said. “There is still great uncertainty among the international trading houses.”
Egypt is the world’s biggest importer of wheat and supplies are a hot-button issue as they are critical to a bread subsidy programme that feeds tens of millions. When Egyptians rose up against autocrat Hosni Mubarak in 2011, a signature chant was “Bread, freedom and social justice”. Egypt‘s state grain buyer, the General Authority for Supply Commodities (GASC), said on Friday it had cancelled the tender because the prices on offer were too high.
One Cairo-based trader said those who participated in the tender put a risk premium on their offer. “The spread in prices is between $16 to $20 above market,” he said. The lowest offer was $186.64 a tonne FOB, or 195.44 a tonne including shipping costs (C&F) for wheat sourced from France, traders said.
They said the lowest offer was well above the price of about $178 a tonne c&f paid by Algeria in a wheat purchase reported on Thursday. “The extra commercial risk because of the ergot problem is being reflected in higher offers which will raise the cost of Egypt‘s imports,” one trader said. “There would be big costs if shipments are refused after all.” Participation in the tender was also lower than the seven trading houses that offered in a tender on Jan. 21, while 16 companies took part in GASC’s tender on Dec. 23 before the ergot issue intensified.