Egypt to issue letters of credit for delayed wheat shipments on Wednesday

Egypt will issue delayed letters of credit for three wheat shipments waiting off France’s northern port of Dunkirk

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Egypt will issue delayed letters of credit for three wheat shipments waiting off France’s northern port of Dunkirk on Wednesday even as new stricter import requirements were under discussion, Egypt’s state grain buyer said.

Tighter import rules could delay future wheat shipments to Egypt, the world’s largest importer of the grain.

The shipments, more than 180,000 tonnes of French wheat that were part of General Authority for Supply Commodities (GASC) purchases due for shipment on Dec. 11-20 and Dec. 21-31, have been held up because exporters have not received letters of credit, or guarantees of payment.

The delay was due to an administrative problem and not dollar liquidity issues, GASC vice-chairman Mamdouh Abdel Fattah told Reuters.

“Suppliers will receive today all the numbers for the letters of credit which were delayed due to administrative issues. It has nothing to do with liquidity,” he said.

When state tenders are awarded, the firm selling the commodity asks for a letter of credit, or guarantee of payment, from one of Egypt’s state-owned banks, which is then confirmed with its own bank.

Some traders have experienced delays receiving letters of credit for supplying goods to Egyptian state buyers amid an acute shortage of dollars.

Abdel Fattah added that potentially lowering the permitted level of ergot, a fungus that infects cereals, in wheat imports into Egypt was also under discussion.

Traders said a lower ergot level would make supplying wheat to Egypt far more difficult.

“The majority of suppliers are not accepting this new change with ergot and some have started to threaten that they will not participate in the upcoming tenders unless GASC introduces changes,” one European trader said.

“GASC is acting unwisely in the ergot issue as they already have enough problems with delays in opening (letters of credit) without introducing other issues into their supply chain which could cause disruption,” the trader added.

GASC has so far allowed ergot levels of 0.05 percent in wheat shipments but Egypt’s agricultural quarantine authority is looking to reduce that level to zero, traders said.

“There are discussions ongoing now to see what we will do about [the ergot level]...If any change does happen we will announce it before the next tender is announced,” Abdel Fattah said.

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