USDA mediates wheat dispute after Egypt's GASC rejects cargo

June 10 Mon Jun 10, 2013 7:01pm EDT

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June 10 (Reuters) - U.S. Agriculture Department officials in Cairo stepped in to resolve a major contract dispute between U.S.-based grain exporter CHS Inc and the General Administration for Supply Commodities (GASC), Egypt's government wheat buyer, according to a USDA attache report.

The dispute arose after a 60,000-tonne cargo of Canadian soft red winter wheat sold by CHS was rejected by Egyptian quarantine authorities in April for containing a higher-than-allowed amount of ambrosia seeds.

CHS offered to replace the shipment with a 58,000-tonne cargo of U.S.-grown SRW wheat, but the GASC insisted on a $30 per tonne discount from the original sales price to reflect a drop in global wheat prices and a 100 percent performance bond, which CHS was unwilling to risk.

The incident highlighted some of the growing difficulties at the GASC following the departure in February of vice chairman Nomani Nomani and nearly all of the group's senior leadership.

Traders have complained that the GASC's new leadership is inexperienced, inflexible and ill equipped to handle the country's roughly 10-million-tonne annual wheat import program.

The GASC has not made a purchase on the international wheat market since February. Two years of political turmoil and economic crisis have eroded Egypt's hard currency reserves, making it difficult for the country to finance essential food and fuel imports.

The GASC threatened legal action against CHS before staff at the USDA's Foreign Agriculture Service office in Cairo, their Egyptian counterparts and U.S. State Department officials intervened. The two parties ultimately struck a discounted deal for U.S. SRW wheat valued as over $17 million.

A CHS spokesperson contacted by Reuters declined to comment.

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