ABU DHABI/CAIRO - An Egyptian decree to allow a small amount of ergot inwheat shipments, aimed at resolving a long-running dispute over the country's import requirements, has been held up by a legal snag.
Egyptian quarantine authorities' refusal to let in a single grain of wheat infected with ergot, a common fungus, has wreaked havoc on the world's largest wheat buyer's tenders for months and is at odds with a more commonly accepted international standard of up to 0.05 percent.
This higher level is endorsed by the ministry of supplies and state grain buyer, the General Authority for Supply Commodities (GASC).
The months'-long gridlock -- which saw several shipments of wheat turned away at ports, sharply lower participation at GASC tenders, and higher wheat prices -- was thought to be finally nearing a resolution when Prime Minister Sherif Ismail intervened on Tuesday and said the country would adhere to the common 0.05 level.
A ministerial decree putting the conflict to rest was expected on Wednesday, but never materialized.
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Egypt's Agriculture Ministry told Reuters the decree was delayed because of a months-old judicial order from the prosecutor general that bans all ergot from entering the country.
The order followed the rejection of a French wheat shipment belonging to trading firm Bunge late last year. The firm subsequently filed a lawsuit, still in court, contesting the decision.
"The prosecutor needs to remove that order first before a decree can be issued," Agriculture Ministry spokesman Eid Hawash said.
REJECTED CARGO
The latest twist in the ergot issue comes as a 33,000-metric ton shipment of U.S. wheat awaits its fate in the port of Alexandria and just weeks before GASC is expected to re-enter international markets.
The U.S. cargo, which belongs to the trading firm Venus, had tested for a 0.006 percent level of ergot, well below the international standard of 0.05 percent, and was rejected on June 12, documents from Egypt's ministries of health and agriculture seen by Reuters show.
Venus has appealed the decision, but was expecting this week's ministerial decree to ultimately free the cargo from quarantine.
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"We are now told that this order by the prosecutor has blocked the decree," a source at Venus said, adding that the legal snag was expected to be resolved and pave the way for the decree to be issued on Sunday.
Traders meanwhile said that if the ergot issue remained unresolved, it would translate into higher prices at the next GASC tender.
"This will cost Egypt in terms of it spending precious dollars on overpriced wheat at a time when its economy is in critical condition," said one Cairo-based trader.
A U.S. Department of Agriculture report issued this month said that Egypt will face $860 million in extra costs and lost export opportunities this year because of "unorthodox agricultural measures," including its zero-tolerance policy on ergot.
"The ergot situation is still a big mess," another Cairo-based trader said.
