March 22, 2017 / 4:02 PM / in 7 months

Egypt rejects seven wheat cargoes, traders to raise prices - sources

CAIRO/DUBAI, March 22 (Reuters) - Egypt, the world’s largest buyer of wheat, has issued preliminary rejections on seven cargoes of the grain since introducing new import rules in January, prompting many traders to raise prices at state tenders, five traders told Reuters.

Egypt’s import rules caused a nearly year-long standoff last year after it rejected a number of shipments for containing the common grains fungus ergot. But it adopted rules in line with international norms after mass boycotts of its state tenders.

It introduced a new streamlined inspection system, reversed a zero-tolerance policy on ergot and no longer sends government inspectors abroad to approve cargoes.

But the five traders told Reuters that under the new system the number of rejected cargoes had risen, driving up the cost of doing business.

The seven cargoes purchased by GASC had received initial rejections from entering Egypt’s ports due to higher than acceptable levels of insects or grass seeds, traders said.

This was in addition to two Russian wheat cargoes and one Argentine cargo that were rejected at their ports of origin this month for not meeting GASC standards.

GASC was not immediately available for comment.

Six of the seven cargoes rejected on arrival were forced to undergo costly fumigation and sieving before being inspected for re-entry, the traders said. One vessel was accepted on re-testing.

These initial entry rejections were rare under the old system, traders said, suggesting the new inspection regime has brought with it tougher enforcement of existing rules.

The extra measures cost $2.5 per tonne of wheat, or about $150,000 per typical 60,000 tonne cargo purchased by GASC, a cost borne by trading companies, the traders said. They say they are now increasing their offer prices by the same amount at state tenders to offset the loss.

“Traders of course are putting a premium now on the prices they offer GASC at above $2 a tonne as a result of the situation,” one Cairo-based trader said.

GASC this season is set to import at least 5.6 million tonnes of wheat, suggesting such an increase could cost Egypt over $11 million per year.

The price at which GASC pays for its purchase tenders can influence global grain prices. (Editing by Veronica Brown and Susan Thomas)

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