Nation has flip flopped on ergot policy, deals with fraud allegations.
The wheat import forecast for market year 2016-17 has been revised down by 3.38% to reach 11.8 million tonnes. Market year 2015-16 wheat imports are being revised downward to 11.6 million tonnes, 4.1% lower than USDA’s official forecast of 12.075 million tonnes due to a persistent shortage of foreign currency that has made opening letters of credit more difficult, significantly hampering imports. In the last several months Egypt has flip flopped on its ergot policy, at one point having zero tolerance, which resulted in failed wheat tenders. The nation has since adopted the standard 0.05% ergot limit.
This year, widespread allegations of fraud prompted the Egyptian government to increase inspections of privately-owned silos. After finding inconsistencies, a parliamentary fact-finding commission was formed to investigate the fraud allegations, uncovering a discrepancy of 200,000 tonnes that had been over reported, worth $63 million, from only 10 sites out of 135 sites where private silos and barns were implementing the program. According to the report, government officials, domestic suppliers, and private silo owners appear to have colluded by overstating local procurement numbers and pocketing government payments.
In wake of the allegations and fraud, Khaled Hanafy, Egypt’s former minister of supply, resigned during a cabinet meeting on Aug. 24. The resignation came four days before the report’s findings were presented to Egypt’s parliament, as pressure mounted from all sides for him to step down. No charges have been formally filed against him.
The report estimates that local wheat procurement from this year’s production reached 4 million tonnes, exceeding the average of 3.32 million tonnes that the Egyptian government procured over the past 10 years. This is well below the 5.3 million tonnes said to have been purchased by the Egyptian government from the 2015 crop.
In market year 2016-17, the FAS forecasts Egypt’s total wheat consumption at 19.6 million tonnes, down 1% from the USDA’s forecast of 19.8 million tonnes. The decrease is due to a slight reduction in the report’s forecast of food, seed and industrial use (FSI) consumption by 0.54% from USDA’s estimate of 18.3 million tonnes, and a decrease in the report’s forecast of feed and residual by 7.4% that USDA forecast in market year 2016-17. However, total wheat consumption still grew by 2% from market year 2015-16, all of it for FSI use.
The anticipated rise in FSI consumption of wheat in market year 2016-17 is driven by high wheat demand by a population that is growing at a rate of 2.4% annually, coupled with the registration of at least 3 million new beneficiaries in the smart card subsidy program and the increasing presence of refugees from Iraq, Syria, Libya, Yemen and Sudan living in Egypt, the total of whom are estimated at 5 million. Under the existing subsidy system, each individual with a smart card is allowed 150 loaves per month, or 5 loaves per day. Baladi bread is sold at a subsidized price of 1¢ per loaf, while the market price is loaf 5¢ per loaf. The government pays the bakers the difference between the two prices.