CHICAGO: Bunge Ltd is seeking to complete the delivery of a rejected cargo of French wheat to Egypt through legal action against the country’s state grain buyer, the global trader’s chief executive said on Thursday.
Bunge started legal proceedings against Egypt’s grain importing body, the General Authority for Supply Commodities (GASC), after the cargo was turned away at delivery in December for containing too much of a fungus called ergot.
The company said on Tuesday that the wheat met Egypt’s specifications for ergot and that inspectors appointed by the government had cleared the cargo when it was loaded on a boat for shipment.
“Their rejection of the cargo does not make any contractual sense,” Bunge CEO Soren Schroder told Reuters. “We just want to execute the contract.”
The company filed the legal challenge in an administrative court in Egypt for the purpose of “protecting our legal rights under a contract which we have executed on according to the conditions,” he said after Bunge reported lower-than-expected quarterly earnings.
Bunge’s cargo is still waiting to get into Egypt, Schroder said. He added that he did not know why ergot had become a trade issue.
Traders have said a power struggle between government bodies in Egypt has fueled confusion in global grain markets about the fungus.
Egypt’s ministry of supplies and GASC had assured traders their wheat could contain up to 0.05 percent ergot, even as the agriculture ministry said it would categorically reject all such shipments.
On Sunday, Egypt’s ministries of supply and agriculture held a joint press conference to affirm that they would accept all shipments with less than 0.05 percent ergot.
Bunge is “working with the Egyptian authorities and GASC to find a solution to this as quickly as possible,” Schroder said of the legal challenge.
Such disputes are “very rare in global trade and they typically always get sorted out in an amicable way,” he said.
Dan Sumner, a distinguished professor of agricultural and resource economics at the University of California, Davis, said it appeared Bunge was trying to take a stand by going to court.
“You can imagine Bunge wanting to send a signal: ‘We’re not going to put up with this,'” Sumner said.