* GASC switched import rules to zero ergot on Aug. 31
* Second wheat cargo rejected at port of origin
* Decision on contracted cargoes expected soon
(Adds Russian wheat rejected)
By Maha El Dahan and Eric Knecht
ABU DHABI/CAIRO, Sept 16 Egypt was unable to
garner a single offer from wheat suppliers at its state grain
tender on Friday, forcing it to cancel and raising renewed
questions about its ability to tap global wheat markets while
maintaining a ban on ergot fungus.
Friday's cancelation comes amid a flurry of cargoes either
rejected or held from export since Egypt reinstated a zero
tolerance policy on ergot last month and applied it
retroactively to all outstanding contracts.
Ergot is a common grains fungus that can cause
hallucinations when consumed in large amounts but is considered
harmless in low quantities.
Egypt is the world's largest purchaser of wheat, on which it
depends to run a bread subsidy programme that feeds tens of
millions of its citizens and which may suffer if the zero ergot
policy continues to block access to global grains.
This week a 60,000-tonne Russian wheat shipment was rejected
at Novorossiisk after weeks of inspection. It was the second
such GASC purchase which failed to make it past the port of
origin following a 63,000 tonne Romanian cargo that fell through
at Constanta earlier this month.
Both cargoes were contracted under the previous, less strict
ergot rules that allowed for up to 0.05 percent in shipments, a
common international standard that state grain buyer, GASC, had
adhered to until last month's change.
Russia, one of Egypt's largest wheat suppliers, said on
Friday it would ban the import of Egyptian fruit and vegetables
after its regulatory watchdog said that the produce had violated
international norms, without specifying.
GASC could not be immediately reached to confirm the
cancellation and the agriculture ministry spokesman did not
respond to repeated requests for comment.
"The risk of offering in GASC's tenders is simply too high
at the present time. It is foolish to offer something you know
you cannot deliver and zero ergot is not possible," one European
trader said, echoing the view of several others.
The decision to apply Egypt's zero tolerance policy on
contracts made under the old rules has infuriated traders, who
insist that their deals should be honoured.
Eight shipments yet to arrive in Egypt were purchased under
the 0.05 percent rule but are now being scrutinised.
Egypt cancelled its last wheat tender on Aug. 31 after
receiving just a single offer. That was GASC's first tender
since formally reinstating the zero-content policy on ergot,
which traders say is impossible to guarantee.
Traders say they expect a decision on the outstanding
contracts to be made early next week.
"Hopefully the cabinet can come up with a solution for these
eight shipments and for forthcoming tenders by Monday," one
Cairo-based trading source said.
Quarrels have persisted between the state's agricultural
quarantine authority, which has maintained a zero tolerance
policy since late last year, and ministries that support the
Inconsistent policy statements from the government and rapid
changes in legislation governing the issue has sown confusion
among suppliers and frustrated GASC's attempts to make
On Aug. 28 Egypt reinstated the ban on imports of wheat with
even the smallest amount of ergot content. This baffled global
suppliers who thought the matter had been settled by an earlier
agriculture ministry decree passed in July adopting the common
Some traders saw GASC's attempt to seek tenders on Friday,
just days after cargoes had been rejected and held up from
shipment abroad, as intentionally designed to fail.
"I suspect GASC wants to show the other Egyptian government
departments that international tenders with zero ergot level are
impossible, which I think they are," another European said.
Traders say the government's experiment with maintaining
stringent quality control out of step with the rest of the world
will soon be running against the clock.
"The Egyptian government will soon be facing the time when
it has to find a solution to the ergot problem if its people
want to eat," the European trader said.
(additional reporting by Michael Hogan in Hamburg and Polina
Devitt in Moscow; editing by William Hardy)