CAIRO: Egypt s tough new regulations to ensure the quality of wheat imports have raised the bar so high that it risks deterring some key suppliers.
Egypt, one of the world s top importers, has been locked in a row over grain quality since an investigation was ordered into Russian wheat imported by an Egyptian firm in May.
In an effort to fix this the Trade Ministry announced new measures this week, including state quality certificates and higher financial sureties for inspectors.
Egypt has put itself in a position that the country risk is probably too high for some of the trade to participate in the tender, Geneva-based Agrinews analyst James Dunsterville said.
Even if you think you have done everything correctly, the chances are higher of having something go wrong, such as having document problems, which means you have to reship the vessel somewhere else at a discount, he said.
Egypt relies on foreign supplies for about half its needs and has a bread subsidy program on which the poor depend.
Disruptions to the supply of subsidized bread last year, a result of surging world grain prices, led to sometimes violent protests in the North African country of 77 million people.
In the current row, Egypt has ordered the re-export of two wheat cargoes this month.
Rosinteragroservis (RIAS), the Russian grain company that sold and shipped the second wheat cargo to Egyptian Traders Co, says it has incurred losses close to $750,000 because the wheat was left in limbo at the port before being ordered back.
This was completely absurd, we had to pay because we are the ones who chartered the ship but we had no control over it, Chris Vanhonacker, RIAS s commercial director, told Reuters.
US wheat better off?
Financial risks aside, the new measures also demand documents that are not available in most supplier countries.
Egypt imported close to one million tons of French wheat in the first 11 months of the 2008/2009 season, data collected from French port authorities showed, but there is currently no system in place in France to provide state wheat quality papers.
They are asking for something that does not exist, a French trader said.
Egypt will also need to reach a deal with Russia, its biggest supplier of wheat this season at more than 4 million tons, on supplying government quality documents.
A Russian official said during a visit by Russian President Dmitry Medvedev to Cairo this week that a long-term supply deal could be set up but only once issues over quality are resolved.
In the United States, the official certificate should be less of problem, traders said.
If this (the new regulations) is validated, it will be perfect for the United States because the US Department of Agriculture already supervises the certification procedure, a senior French trader said.
The United States has in the past been one of Egypt s biggest suppliers but not in recent years.
The new measures do not indicate any changes to the wheat specifications required by the main state wheat buyer, the General Authority for Supply Commodities (GASC).
Those requirements were made more stringent last year after problems with the quality of Ukrainian wheat. GASC now asks for a maximum of one percent insect damage to wheat instead of two.
In Egypt s tender on June 18 that got cancelled, most traders bid Russian wheat with a maximum two percent insect damage.
One percent bug damage just does not exist very often in Russian wheat, Vanhonacker said.
GASC tenders could see less offers if requirements remain unrealistically high or they will have to pay a premium.
They will either have companies not offering at all because they cannot make the tender terms or offering bids outside the tender terms, which therefore should be rejected, Dunsterville of Agrinews said.
If they (companies) are offering within tender terms, they will for sure put in a market risk protection which will mean higher prices for the GASC, he said. -Additional reporting by Sybille de la Hamaide and Valerie Parent in Paris.
