Egypt’s New Wheat Inspection System Seen Leading to Lower Prices

(Bloomberg) -- Egypt's new wheat inspection program was met by relief from traders, who said the system will likely be easier to navigate and may lead to lower prices.

The General Organization for Export and Import Control, or GOEIC, will be the sole state body responsible for wheat inspections at shipping and arrival ports, replacing government inspectors. The new system may lead companies to reduce prices by about 5 percent in international tenders, according to Alaa Ezz, the secretary general of the Federation of Egyptian Chambers of Commerce.

“The pain of dealing with three different government bodies, each with its own standards and regulations was really impossible,” Hesham Soliman, president of Alexandria-based Medstar for Trading, said in a phone interview. “There's finally some clarity now. We will be dealing with just one entity.”

Soliman estimated that inspection costs will be cut by at least half after applying the new rules.

“Egypt will start seeing better prices and more offers,” he added.

Trader Standoff

The world's biggest wheat buyer was in a standoff with traders this year after twice enforcing a ban on cargoes containing ergot, and then backtracking to the international standard, which allows for shipments to contain 0.05 percent of the fungus. Egypt is closely watched by the grain market because it buys large amounts of wheat for a subsidized bread program for citizens.

The months-long dispute over quality standards hurt confidence among traders and led to canceled tenders, higher prices and fewer offers.

“Unifying the inspection body will not only make the atmosphere clearer for the market, but will also help cut the price for the end user, because at the end of the day when traders charge a high risk premium, the buyer is the one paying the price” said Ezz of the Chambers of Commerce.

The process of sending a team of six officials to the shipping port will be scrapped and replaced by a system in which GOEIC contracts inspection companies on behalf of suppliers to scan wheat at shipping ports and assigns local inspectors at Egyptian ports.

Traders can now discharge the cargo into bonded warehouses before receiving approval, Ezz said. Previously, suppliers had to keep grain in the shipping tanker for up to 10 days pending final approval.

GOEIC is part of the Trade Ministry and responsible for testing imported and exported products to ensure they meet quality standards. It will oversee inspection of corn and soybean imports, in addition to wheat.

Egypt purchases in the wheat market are starting to pick up. Last week, the country bought 420,000 metric tons of Russian and Romanian grain, the biggest purchase in two years. It's expected to buy 11.8 million tons in the current marketing year, compared with 11.9 million in the prior season, the U.S. Department of Agriculture said in a report earlier this month.

To contact the reporter on this story: Salma El Wardany in Cairo at selwardany@bloomberg.net. To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net, Lynn Thomasson