UPDATE 2-Egypt sticks to tough standards for wheat imports

Tue Apr 8, 2014 6:23am EDT

* Minister earlier pledged to review moisture rule

* Some traders sceptical about minister's drying proposal

* Govt expected to tender again before local harvest (Adds trader quotes)

By Maggie Fick and Valerie Parent

CAIRO/PARIS April 8 (Reuters) - Egypt is committed to keeping tough specifications on wheat imports, Supplies Minister Khaled Hanafi said on Tuesday, giving no sign the world's top wheat importer will bow to lobbying by French exporters for easier standards.

Egypt exerts a strong influence over the global wheat market with its imports of 10 million tonnes per year, split more or less equally between the state-run General Authority for Supply Commodities (GASC) and private importers.

Egyptian millers who work for GASC, dissatisfied with the moisture content of French wheat, pressured the state buyer to tighten its limit on moisture in January, putting France at a disadvantage in GASC's keenly contested tenders.

Hanafi said last month that Egypt was reviewing its tender specifications in light of rising wheat prices and political volatility in Black Sea exporting countries Russia and Ukraine.

But his latest comments indicated no change was on the cards.

"The ministry is committed to the standard specifications in wheat imports from abroad, including that the moisture content does not exceed 13 percent," Hanafi said in a statement after meeting in Cairo with representatives from France Export Cereales (FEC), an export lobby group.

Egypt's basic moisture limit in its tenders is 13 percent, but the January revision ended a tolerance of up to 13.5 percent, with penalties for the seller. The average moisture content in the 2013 French wheat harvest was 13.5 percent.

DRYING PROPOSAL

Hanafi said he had suggested during the meeting that French companies dry the wheat to reduce the moisture content either on farms or at export ports.

The minister said FEC had agreed to study this proposal. The group could not immediately be reached for comment on the meeting.

French export traders said the market had not expected Egypt to make concessions on the issue this season as its annual import campaign draws to an end.

GASC may consider concessions next season, however, if its supply options are more limited, they said.

Some traders were sceptical about the minister's proposal for drying wheat, citing the extra time and costs and resulting higher prices.

"If they want wheat of a certain moisture, then you are much better off buying it at this moisture level," a Dubai-based trader following the Egyptian market said.

Drying wheat before shipment is already done in France, traders said, but not all ports are equipped, and the process would make French wheat less competitive.

"It's not simple to manage. You need a lot of time to dry grain, and you have to prepare the appropriate upstream logistics, but it's feasible," a French trader said.

Another French trader, however, estimated the additional cost of drying wheat at a modest 1 to 1.5 euros per tonne, depending on where the drying was done.

Traders said GASC did not redistribute penalties paid by exporters for exceeding the 13 percent moisture limit, which added to the millers' grievance about French wheat quality.

"Wheat at 13 percent moisture content is not a worldwide standard," the second French trader said. "So this will be a constraint for other countries as well as France, which is certainly more penalised because it can go as high as 14-14.5 percent."

The main focus for the market at this stage is whether GASC will tender again this season and the prospects for French wheat in that sale, traders said.

Hanafi told reporters on Monday he expected GASC to issue one more international tender before the government starts buying wheat from the domestic harvest on April 15. (With reporting by Ehab Farouk in Cairo; editing by Jason Neely and Jane Baird)

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