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Egypt Cancels Zero Ergot Wheat Policy

wheat

By Reuters 2016-09-21 19:23:46

Egypt has reversed its controversial zero-tolerance policy on the common grains fungus ergot, the government said on Wednesday, backtracking on an import regulation that had all but blocked its access to global wheat.

Egypt, the world's largest buyer of wheat, has seen its imports grind to a halt since it imposed a ban on ergot last month, with three successive state tenders cancelled on the back of mass boycotts by suppliers who say the condition is impossible to guarantee.

Ergot can cause hallucinations when consumed in large amounts but is considered harmless in low quantities.

The government said it was reinstating a 0.05 percent tolerance level for ergot, a common international standard it had used before the ban, and was applying it to both outstanding and future wheat contracts.

The decision to apply last month's ban retroactively to outstanding contracts had led to the suspension of 540,000 tons of wheat en route to Egypt after being suspected of ergot contamination, the government said.

A flurry of cargoes held up and rejected at ports after last month's ban infuriated traders, who argued their contracts, made under the old 0.05 percent rule, should be honored.

Russia, a top supplier of wheat to Egypt, banned Egyptian fruit and vegetable imports shortly after one of its cargoes was rejected before setting sail from Novorossiysk. An Egyptian delegation is expected to arrive in Russia next week to discuss the impasse.

TRADERS SKEPTICAL

Egypt runs a massive food subsidy program that provides bread for tens of millions of its poorest citizens and which may have come under threat had it not eased its import restriction.

After announcing the policy reversal the government said it had enough wheat to sustain the country for four months. It said it would compensate for the recent slowdown in wheat inflows by "operating all ports."

"Egypt had no real choice but to cancel the zero ergot policy if they want to feed their people with large scale wheat imports. It has been said so many times during this affair that no country anywhere in the world can provide wheat with zero ergot in bulk volumes," one European trader said.

Still, some traders expressed skepticism at what they saw as just the latest flip-flop in a months'-long saga that has seen decrees overturned and contradictory policy announcements from different ministries.

"There needs to be new legislation. This is not enough for any supplier to participate," one Cairo-based trader said.

Wednesday's reversal restores 2010 standards that permit 0.05 percent ergot tolerance but makes no mention of agriculture quarantine legislation that still allows for zero tolerance, the trader added - a contradiction that in the past allowed rejections to continue.

As part of the rule reversal, the government said it will contract an international firm to conduct ergot inspections on wheat shipments and discontinue the practice of sending foreign delegations led by officials from three of its ministries.