Paris wheat futures fell to a fresh contract low after Egypt, the world’s top wheat importing country, confirmed it was rejecting a cargo of French over a finding of ergot, amid some confusion over the specification regime.
Paris wheat for March, the touched E162.00 a tonne in early deals, down 1.1% on the day, and taking losses so far in 2016 to 6.6%.
The decline followed weekend news that Egyptian authorities would after all, after retesting, reject a 63,000-tonne cargo of French milling wheat on the vessel Amira, over a finding of small levels of ergot, a fungus which can cause hallucinations if consumed.
The saga of whether Egypt, which has historically allowed ergot at levels of up to 0.05%, would reject the cargo under new zero tolerance rules has created confusion in the industry.
While Gasc, the grains authority which bought the grain, has reassured that tolerance of ergot levels up to 0.05% would be maintained, the farm ministry has underlined that any finding of the fungus would prompt cargo rejection.
“Despite a legal tolerance of 0.05 %, it looks like Egyptian authorities are getting toward a zero tolerance,” Agritel, the Paris-based grains consultancy, said.
‘Not great news’
A UK-based trader told Agrimoney.com: “This is not great news for exporters trying to sell French wheat, or for that matter wheat from anywhere, into Egypt.
“But at least from the French perspective they are relying less on Egypt for their exports than last season,” when poor-quality harvest prompted hefty shipments on this route, with Egypt historically enforcing less stringent specifications than some other importers, such as Algeria.
In the first five months of 2015-16, to the end of November, Egypt imported 63,000 tonnes of French wheat – down 88% from the 544,000 tonnes bought in during the same period of last season.
‘Fewer offers and higher prices’
Some see the lack of consistency among Egyptian officials as reflecting their different priorities, with Gasc charged with ensuring sufficient grain to feed the country’s 82m-strong population, while the agriculture ministry has plans to boost domestic agriculture.
The ministry in December said Egypt was aiming to meet 80% of its wheat needs from domestic production by 2018.
The confusion over wheat import specifications – coupled with a credit hiccup last month over a French wheat deal amid talk of a shortage of dollars to pay for the grain – is being seen as likely leading to Egypt paying extra for its wheat imports.
“Many suppliers are unsympathetic with the new [ergot] requirement, which means Egypt will face the prospect of fewer offers and higher prices,” traders at a major European commodities said.
“Egypt still has to eat.
“But whether it will receive sufficient offers at zero ergot is open to doubt, especially as the finding of a single piece in a 50,000-tonne cargo could well become the means to ‘renegotiate’ a contract.”