Global wheat prices fell slightly this week due to uncertainty over Egypt’s wheat policies, as the country cancelled tenders and rejected a shipment from Bunge, claiming it had more than the allowable amount of ergot fungus. Bunge has rejected this, saying inspectors appointed by the Egyptian government had checked and approved the shipment before departure, and is taking the Egyptian government to court over the disputed shipment.
The General Authority for Supply Commodities (GASC) cancelled Egypt’s latest wheat tender on Sunday, without providing a reason. GASC has now cancelled three tenders in two weeks, and has only bought one shipment of wheat – 60,000 tonnes from Romania – since late January.
Government conflicted over ergot
Traders have been reluctant to submit bids, or offered shipments at higher prices, because of uncertainty over ergot, according to Bloomberg. Egyptian authorities have issued conflicting statements about ergot, with the Ministry of Agriculture saying it will reject shipments containing any amount of the fungus, and GASC saying ergot levels of up to 0.05% are acceptable.
Egypt has also turned away four 30,000-tonne shipments of US soybeans in recent weeks, similarly claiming they contained higher-than-permitted levels of the ambrosia fungus, according to Reuters. Traders said it was highly unusual for a shipment to be rejected outright.
Domestically there was also confusion, as Egypt scrapped a plan to charge international prices for Egyptian-grown wheat. Farmers had strongly criticised the change, which was supposed to prevent corruption, and said it would cause domestic wheat production to fall – but the government’s supply minister rejected this, saying Egypt’s harvests were secure.
After a meeting between the Egyptian prime minister and ministers for supply, agriculture and finance, the government announced it will pay a price of US$53.64 (€48.04) per 150kg – equivalent to US$357 (€320) a tonne, well above the global norm.
Egyptian producers see strong growth
Away from the turmoil of the grain markets, Egyptian food producers turned in strong results. Dairy and juice firm Juhayna said it had increased sales 15% year-on-year in 2015, reaching almost US$540m (€484m), while profits rose 65% to more than US$35m (€31m).
Last month Juhayna’s management said the firm planned to invest more than US$75m (€67m) in expansion projects this year. The company said it had already invested almost US$44m (€39m) to grow its capacity and improve its distribution capabilities.
Another juice firm, Beyti, which is owned by a joint venture between PepsiCo and Saudi Arabia’s Almarai, announced plans to spend US$510m on expansion over the next five years. Its managing director, Mohamed Badran, told Daily News Egypt the firm had increased its capacity by 200% in the last three years, and had seen a 150% increase in sales as a result.
Confectionery producer Golden Foods said it was targeting a 10% increase in sales this year, aiming to reach US$3.8m (€3.4m). While it invested US$30,000 in a new production line last year, the company said it was not planning any capacity upgrades this year, because of the continuing economic uncertainty in Egypt.