Egypt Promises Transparency to Suppliers After Wheat Trade Row

(Bloomberg) -- Egypt is working to end confusion over its inspection policy for wheat imports after repeated cargo delays created uncertainty in the market and forced the world’s top wheat importer to pay more to provide its poorest people with bread.

Egypt had "promised transparency" to its suppliers and would issue specific rules for wheat importers in different languages within two weeks, Supply Minister Ali El-Mosilhy said in comments to Bloomberg in Dubai on Wednesday. The move comes after French and Romanian cargoes were held up for weeks at the Red Sea port of Safaga after inspectors found poppy seeds among the grain. Both shipments have since been cleared, but the saga caused concern among traders as it mirrored last year’s months-long standoff over the common ergot fungus, which saw several cargoes rejected.

Confusion over Egypt’s ergot policy, with different arms of the government apparently taking conflicting views on the issue, meant the country received fewer offers at higher prices in its international tenders for wheat used to make subsidized bread. The issue was only resolved after the prime minister intervened with a decree making it more difficult for inspectors from the agriculture quarantine department to reject cargoes.

Uncertainty over the fate of the two cargoes containing small amounts of poppy seeds had prompted traders to put a premium on Romanian and French supplies in recent tenders. Though Egyptian Supply Ministry officials sought to play down the issue, saying early on that the seeds from the red flower that grows in Europe were not toxic and could not be used to make opium, traders said they wanted government agencies to agree on consistent rules.

Inspection Rules

Representatives from Egypt’s agriculture, trade and supply ministries held a meeting over the weekend to try to resolve recent problems in grain imports, according to two government officials with knowledge of the matter. The officials discussed scrapping old rules that allow the agriculture quarantine department to inspect food imports, said the people, who asked not to be identified because the talks are private.

Issued at the height of the ergot crisis late last year, the prime minister’s decree ended a practice whereby quarantine officials would travel abroad to check cargoes of grain during loading. It tasked the General Organization for Export and Import Control with overseeing inspections. However, the agriculture quarantine challenged the decree in court and has continued to play a role in the inspections. A change to the rules aims to end that, the two officials said, after traders blamed the new spate of cargo delays on disgruntled quarantine inspectors.

Jean-Philippe Everling, CEO of the French unit of Casillo, whose 59,000-ton wheat cargo was caught up in the dispute, welcomed Egypt’s efforts to end the uncertainty.

He said the changes would persuade "trading houses to offer more aggressively, decreasing step by step the risk premium included in the price which has cost Egypt millions and millions of dollars."

Everling said his company, TransGrain, would offer to sell wheat to Egypt in future despite the dispute but urged the government to pay for the two delayed cargoes "to give more trust to the suppliers for the next tender."

Poppy Problems

Red poppies, or papaver rhoeas, can grow in fields of grain crops where their life cycle matches management of the land, according to the Botanical Society of Britain and Ireland. The pink flower, papaver somniferum, can be cultivated for opium and is banned in Egypt.

The governments of Romania and France had both appealed to the Supply Ministry to release the cargoes in recent weeks. The French embassy said in a letter to Egypt’s import and export authority that the poppy seeds found among its grain were non-toxic. Romania’s ambassador also met with the Supply Minister this week and urged Egypt to stand by the certificates issued by the international inspection companies accredited by the government when deciding whether to accept wheat cargoes, the ministry said in a statement.

Bread is a political issue in Egypt, where the government provides 250 million subsidized loaves a day. The North African country’s own wheat harvests do not meet demand and the country of 96 million imports wheat through regular international tenders. Any disruption to wheat supplies could trigger unrest in a country where last year’s decision to float the pound has pushed inflation above 30 percent and increased reliance on subsidized bread.

To contact the reporters on this story: Claudia Carpenter in Dubai at ccarpenter2@bloomberg.net, Salma El Wardany in Cairo at selwardany@bloomberg.net.

To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net, Lin Noueihed, Lynn Thomasson

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