Focus on Egypt

by Chris Lyddon
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World’s biggest wheat importer dealing with an economic downturn.
Egypt is the world’s biggest importer of wheat and runs a national system to keep its population supplied with subsidized bread. However, a sharp economic downturn has hit its currency and added urgency to the need to reform the system. The country’s farming is efficient, but the availability of fertile land is limited in comparison to its fast-growing population.

The International Grains Council (IGC) forecast Egypt’s 2017-18 total grains crop at 15.3 million tonnes, which compares with 15.5 million the year before. Wheat production is forecast unchanged at 8.6 million tonnes. The 2017-18 maize crop is forecast at 5.8 million tonnes, down from 6 million the year before. Sorghum production is forecast at an unchanged 800,000 tonnes.

The IGC forecasts Egypt’s 2017-18 grains imports at 21.9 million tonnes, up from 20.5 million the year before. The figure includes 12.1 million tonnes of wheat, up from 11.6 million in 2016-17. This year’s maize imports are forecast at 9.7 million tonnes, up from 8.8 million the year before.

“On July 5, 2017, the agriculture minister announced a near-doubling of the 2017-18 maize procurement price, to EGP3,400/t (US$190),” the IGC said.

Egypt is set to produce 4 million tonnes of rice in 2017-18, according to the IGC. The figure for the previous year’s rice crop was 4.8 million. The IGC also reported that the government said on July 6 that its ban on rice exports would continue at least until the new crop harvest.

Economic woes

The country faces problems with high unemployment, and an unstable currency, with its main foreign exchange earning industry, tourism, having suffered a sharp fall in revenues. That has created a need to reform Egypt’s subsidized bread program.

“They are finding it difficult to cope with importing wheat,” Dorit Cohen of the U.K.’s British Cereals Exports promotion body, part of the Agricultural and Horticultural Development Board, told World Grain.

Currently, she explained, about 60% of imports are controlled by the state body GASC General Authority for Supply Commodities, with 40% private.

“This will change in the future,” said Cohen, who visits Egypt regularly to discuss needs with local millers. “What the millers explained to us is that they are spending so much money on subsidizing the bread wheat to feed the low-income population.”

One problem is that subsidized bread is inexpensive and a family with the right to buy 10 subsidized loaves might buy them and sell them if they are not needed or even use them as animal feed.

“They need to reform the subsidy policy to reduce the wastage,” she said. “They are literally spending so much money.”

However, the price of bread is a sensitive subject.

“What they are going to do is phase out the subsidy system, but slowly and gradually,” she said. “What they have done with oil and gas and other commodities, they have cut out the subsidy system outright. With bread they can’t do that.”

Imports eventually will be handed over to multinational grain groups.

“Already multinationals such as Toepfer and Cargill are in place in Egypt waiting for that to happen,” she said. “There is no timeframe for this at the moment. What they will also do is hand over more import control to the private millers.”

A fast-growing population will make Egypt more dependent on grain from outside.

“They will need to import more,” she said. “They are increasing their own domestic production but it is very slow. The majority of the country is desert and they rely on production to happen around the Nile River. There are irrigation issues, weather issues.”

Russia is the dominant supplier.

“The Russians basically are very strong in the Egyptian market and we will not be able to compete,” Cohen said.

Instead, British exporters are aiming for niche markets.

“Where there is an opportunity for the U.K. is in the biscuit market,” she said.