In Commodity News 29/06/2016
Wet weather across Europe is threatening wheat quality in some of the biggest exporters and may make it harder for top buyer Egypt to find fungus-free grain.
Rains in France, Germany, Ukraine and Russia in recent weeks have created ideal conditions for crop disease just before most harvesting is set to start. Much of France, one of the largest suppliers of wheat in Egyptian tenders, got more than double the normal rain in the past month, World Ag Weather said.
That’s boosting the risk of fungi including fusarium and ergot, which can be toxic to humans in high amounts. Egyptian officials rejected several cargoes containing small amounts of ergot at the start of the year and again in June, even though they met global standards. Egypt spends billions of dollars a year on wheat for a subsidized bread program to feed people and the imports are seen as a bellwether of demand across the Middle East and North Africa.
“It’s probably going to be a tough year in terms of quality, because the weather hasn’t been exactly very friendly,” said Amy Reynolds, a senior economist at the International Grains Council in London. Wet, cloudy weather in France, Germany and parts of the Black Sea region are “the sort of conditions that are favorable for fungus,” she said.
Ukraine, Russia
Wet weather in May and early June in areas of Russia and Ukraine increased instances of fusarium, but it’s too early to tell if ergot will be a bigger problem than usual, said Mike Lee, an agronomist and founder of Black Sea Crop Tours, which studied fields across both countries earlier in June. Ukrainian crops saw “intensive development” of fungal diseases in the past week, researcher UkrAgroConsult said Tuesday.
“Cool, wet weather at flowering increases the likelihood of ergot, and it’s been cool and wet all through flowering this year,” Lee said by e-mail. “I did see plenty of fusarium in the ear and other fungal disease.”
Fusarium can produce chemicals known as mycotoxins that can be poisonous for humans and livestock. Most grain buyers, including Egypt’s state-run General Authority for Supply Commodities, set limits on the levels of mycotoxins they’re willing to accept.
Egyptian Purchases
Egypt should be able to source wheat as long as it allows an international standard level of 0.05 percent ergot, said Swithun Still, a director of Morges, Switzerland-based trader Solaris Commodities SA. Rejected cargoes, and conflicting statements from different parts of the government over what level would be permitted, caused traders to refrain from offering grain or raise their prices in the first couple of month of this year.
While the Cabinet is expected to issue a decree soon allowing a level of 0.05 percent, the Agriculture Ministry said last week it will apply a zero-tolerance policy until the directive is received. Ministry spokesman Eid Hawash declined to comment further on Sunday.
The country’s marketing year starts July 1, and GASC has typically started purchases for the new season by now.
It’s too early to tell how much French grain might be affected by various diseases, said Wibke Baars, a consultant at Paris-based farm adviser Agritel, which inspected fields in north-central France last week. French farmers will probably start harvesting wheat in the next 10-14 days, said Jean-Paul Bordes, a research and development manager at crop researcher Arvalis in Paris.
“We had this very strong precipitation during the last few weeks, which is more or less still continuing, and that has certainly favored the development of fungal diseases,” Baars said by phone. “We, as well as the whole market, are kind of in a wait-and-see position until the harvest starts.”
Source: Bloomberg
