Focus on Egypt
June 01, 2005
Reform and reclamation help expand agricultural output
by Mario Sequeira
Agriculture in Egypt is confined to the northern Nile Delta and a narrow strip along the Nile from Cairo to Aswan in the south, because on either side of the Nile lie deserts. Arable land thus comprises just 3% of the country’s total land area but ambitious plans are being implemented to increase this to 25%. In 1997, a massive multi-billion-dollar, 20-year project began to reclaim desert land for agriculture and other industries west of Lake Nasser in the south. Called the New Valley project, it involves building a massive pumping station to pump water to a 300-km-long canal that will stretch to the western border and irrigate the land around it.
The pumping station, believed to be the biggest of its kind in the world, has been completed as has part of the canal. Already, thousands of hectares are being cultivated to grains, fruits and vegetables.
A similar land reclamation project is being undertaken in the Sinai Peninsula in the northeast. According to the government, these massive projects will make an estimated 1.25 million hectares of desert land cultivatable.
This huge investment reveals agriculture’s importance in Egypt’s economy. The sector accounts for 17% of Gross Domestic Product and 32% of the labor force.
Most Egyptian farms are small, irrigated and family owned. The average farm size is 1.7 ha, but 50% cultivate less than 1 ha. About 10% are bigger than 4 ha.
The most important crops are wheat, rice, maize, berseem (or Egyptian clover), cotton, fruits and vegetables. Wheat and berseem are grown in winter and cotton and rice in summer.
One of the most significant shifts in land usage has been the expansion of horticultural production. Egyptian farmers now cultivate a wide variety of fruits and vegetables, including tomatoes, cucumbers, potatoes, lettuce, onions, citrus and mangoes. Citrus fruits and grapes are the two dominant fruit crops.
Since 1987, the government has been taking steps to liberalize the economy, including agriculture. The pace of liberalization has picked up with the Agricultural Reform Program of 1991 and since 1995, when Egypt joined the World Trade Organization on the basis it meets certain conditions.
The reforms have included removing controls on production and marketing of all grains, opening the sector to the private sector, privatization of state enterprises and ending or reducing tariffs and bans on trade in agricultural commodities.
The government still plays a big role in the marketing of several commodities — including wheat and wheat flour — as they are considered strategic commodities. Wheat is especially important, as it is a staple and production meets just half of demand. Wheat imports have averaged about 7 million tonnes in the past five years.
The government sets procurement prices, generally close to or higher than market prices, to encourage wheat planting and buys the commodity for its food subsidy program. The government agencies involved are the Ministry of Supply and Domestic Trade, through the General Authority for Supply Commodities (GASC), and the Food Industries Holding Company (FIHC), an agency of the Ministry of Public Enterprises, which controls all the public flour mills in the country.
The liberalization of agricultural production and marketing, the provision of higher-yielding crop varieties and the reclamation of new land for cultivation has helped Egypt increase crop production. In the past decade, production of wheat, rice and maize has steadily increased.
WHEAT AND FLOUR MILLING
Most of the wheat produced in Egypt is of the soft variety. Wheat production in 2004-05 is estimated at 6.6 million tonnes, slightly up from 6.4 million tonnes in 2003-04. This increase is attributed to increased planting of higher-yielding varieties and also to a higher procurement price of EGP1,100 (U.S.$189) per tonne. The average yield for the 2003-04 crop was 6.2 tonnes per hectare. The new varieties have the potential to yield 7.6 tonnes per hectare.
In the domestic market, nearly 70% of domestic wheat is consumed in rural areas — either by farmers themselves or sold to neighbors. In 2003-04, the government was able to buy only 2.1 million tonnes of domestic wheat. In 2004-05, it aims to purchase 3 million tonnes of domestic wheat but is not expected to get that much.
Annual per capita consumption of wheat in Egypt is one of the world’s highest. It was estimated at 186 kg in 2004-05 and rising, due to the increase in prices for bread substitutes such as rice and potatoes.
As a result, wheat consumption has been about 13 to 14 million tonnes annually during the past five years. In 2004-05, it is estimated at 13.9 million tonnes, of which 7.5 million tonnes will be imported.
Egypt has two main categories of bread: baladi, a coarse and dark-grained type of pita bread made from baladi flour, which is produced by extracting 82% of wheat grain, and fi no bread,
a bread made from fi no flour, which is produced by extracting 72% of wheat grain. A third category, also called baladi but made with 80% baladi wheat and 20% white maize, is slowly increasing its share in the market.
When white maize was first introduced in 1997 to help cut Egypt’s huge wheat import bill, the government procured about 140,000 tonnes of the product. In 2004-05, the government is aiming to buy 500,000 tonnes for the new wheat-maize blended bread.
The baladi flour and bread industry are controlled by the government, which uses its own mills and contracted private mills to grind the wheat for bakeries, which sell the bread as part of the government’s subsidy program.
Fino flour is of higher quality than baladi flour and is sold at market prices. It is used to make French breads, higher-quality pita bread and pastries. The fi no flour market was liberalized in 1992 with one restriction: private companies could make 72% extraction flour only with imported wheat.
The public sector milling industry consists of 126 mills (mostly small and medium size) with a total capacity of 7 million tonnes per year. The seven companies that operate these mills are controlled by the Food Industries Holding Co. Of the 126 mills, 109 produce 82% flour and seven produce 72% extraction flour.
There are 36 private commercial mills which only produce fine flour and have a total annual capacity of 2.8 million tonnes. Annual consumption of fine flour is estimated at 2.5 million tonnes of wheat equivalent while total annual milling capacity is estimated at 3.76 million tonnes of wheat equivalent.
As a result of the huge bread demand, wheat imports have surpassed 5 million tonnes since 1990. Imports over the next two years are expected to be 7.5 and 7.6 million tonnes, respectively, in line with rising wheat consumption.
MAIZE AND RICE
In terms of volume, maize and rice are major grain crops. Maize production is estimated at about 5.7 million tonnes in 2004-05 and 5.9 million tonnes in 2005-06. This growth is due to increasing livestock feed demand, especially the poultry industry, and rising imported yellow maize prices.
Large commercial end-users and feed mills rely on imported yellow maize to meet their requirements. They import nearly 400,000 tonnes annually for the production of starch and sweeteners.
Also, there has been a significant quantity of green maize used in the production of silage for dairy and beef cattle feed.
Maize consumption in 2004-05 is estimated at 9.88 million tonnes, most of which will be used for animal feed. About 1.5 million tonnes will be used for food purposes. There is a small but growing demand for snack foods made of maize.
Nearly 2.3 million tonnes of the imported maize is used by the poultry industry and 1.2 million tonnes by the buffalo and cattle industries.
Rice is a major summer crop, accounting for 10% of the total crop area. The area dedicated to planting rice has been increasing over the past two decades. It was 635,000 ha in 2004-05, up nearly 1% from the previous year. Part of the reason for increased planting in 2004-05 is a sharp fall in cotton prices.
Rice production is estimated at about 6 million tonnes in 2004-05 and slightly higher in 2005-06.
The Rice Institute of the Ministry of Agriculture has developed several new rice varieties with an average yield of 14 tonnes per ha, or about 40% higher than the average yield of the traditional varieties. The Ministry estimates that the new varieties are being used in most rice-growing areas.
Egypt is a net rice exporter. Exports are estimated at 770,000 tonnes in 2004-05 but will decrease to 550,000 tonnes in 2005-06. The recent increase in value of the Egyptian pound against the U.S. dollar has made Egyptian rice less competitive on the international market.
Small quantities of high-quality, name-brand rice are imported by upscale supermarkets. WG