Egypt Wheat Market Thaws as Traders Come Back After Boycott

(Bloomberg) -- Traders returned to Egypt’s wheat market after the nation eased import rules, signaling a boycott of the world’s top buyer is over.

In a tender on Thursday, the state-run grain buyer bought four cargoes of Russian wheat from Aston and Al Wehda, according to two traders involved in the tender, who asked not to be identified because they’re not authorized to speak to the media. It also received offers from Olam International Ltd. and Louis Dreyfus Co.

It’s the first deal after a boycott caused three previous tenders to fail as traders declined from offering any wheat, balking at a zero-tolerance policy for a common type of grain fungus known as ergot. Egypt canceled the ergot ban on Wednesday, promising a return to international standards that allow cargoes with up to 0.05 percent of the fungus.

Egyptian officials have changed and then quickly reversed import standards for wheat twice this year, leaving traders skeptical about participating. The General Authority for Supply Commodities, or GASC, also delayed the tender by about three hours on Thursday as it revised the terms, said traders, who asked not to be identified because they’re not allowed to speak to media.

Wheat Premium

Al Wehda sold 180,000 tons of Russian wheat at $187.11 a ton, including freight, for shipment from Oct. 21 to 31, according to the two traders. Aston sold 60,000 tons at $186.80 a ton. That compares with prices of $167 a ton for wheat for loading at Black Sea ports, according to data as of Sept. 16 from the Institute for Agricultural Market Studies.

The premium is a sign of the wariness among traders about doing business in Egypt after the country rejected several cargoes this year, including vessels from Romanian and Russia, because of ergot. GASC received only four offers in this tender, fewer than normal.

Egypt, which relies on regular wheat purchases to provide subsidized bread for its citizens, has been a headache for traders this year because of frequent rule changes. Unnecessary and burdensome regulations will leave Egypt with more than $860 million in direct costs and lost export earnings this year while its citizens pay more for their food, according to a U.S. Department of Agriculture report in June.

Wheat for December delivery slid 1 percent to $4.015 a bushel as of 3:17 a.m. in Chicago.