Wheat, in particular, plays an important role in the diet of the Egyptian people, and its population’s total need is far greater than the potential for domestic consumption. Political turmoil has complicated the grain market situation since a revolution in 2011 and a further change of government in 2013.

According to the International Grains Council (IGC), Egyptian grain production in 2013-14 will be 16.5 million tonnes, compared with 15.4 million the previous year. Of that, wheat production will be 9.4 million tonnes, up from 8.5 million. The corn crop is put at 6 million tonnes, up from 5.8 million. Egypt is also set to produce an unchanged 900,000 tonnes of sorghum.

Egypt is a huge importer of grain. Total grain imports are predicted at 15.4 million tonnes in 2013-14, up from 14 million the year before. Wheat imports at 9.6 million tonnes, up from 8.3 million, make Egypt the world’s biggest wheat buyer. It is predicted to take an unchanged 5.7 million tonnes of corn.

At the HGCA’s recent Outlook Conference in London, its analyst, Jack Watts, noted Egypt’s continued leading role in wheat trade, despite a sharp increase in Chinese imports, which has put that country in second place.

“Who Egypt buys from is a big influence on price,” Jack Watts said at the HGCA’s Outlook conference. He noted that the Ukraine had managed to win a great deal of export business to Egypt and the Black Sea origins have tended to dominate.

The HGCA’s export promotion arm, British Cereals Exports (BCE), keeps a watch on the Egyptian market as a potential destination for U.K. wheat, even though competition from cheaper origins has kept U.K. suppliers out of the market for some time.

“The U.K. has not exported any wheat to Egypt over the past decade,” BCE said in a paper on the country as a potential destination written in 2011. “The U.K. is included on Egypt’s government wheat tender list as an official supplier,” it noted.

It explained one reason for Egypt’s high wheat demand. “Egyptians are among the highest per capita consumers of wheat with 72% of Egyptian diets consisting of wheat, corn and rice,” it said.

Close relationship with Russia

Russia has guaranteed to supply Egypt with wheat. According to an article published by the Egypt Independent on Sept. 18 and translated direct from the daily newspaper Al-Masry Al-Youm, of which Egypt Independent is a sister publication, “Alaa Qenawy, commercial minister and head of the Egyptian Commercial Representation Bureau in Moscow, said Russia has pledged to meet Egypt’s needs in wheat through long-term deals that extend from three to five years.”

In statements to the paper, Qenawy said that Russia “is expecting a surplus of wheat this year and added that Egypt’s wheat import policy depends on diversifying import countries.”

He also said that Russia wanted to invest in storage in Egypt.

“Al-Masry Al-Youm has learned from official sources that Egypt has asked Russia to give grants and aid amounting to $260 million to build silos.

Private and state mills

According to BCE, 126 mills are operated by seven public companies affiliated with the Food Industries Holding Company (FIHC). They mill wheat purchased through the Cairo-based GASC (General Authority for Supply Commodities).

“Public mills often have older, less efficient technology compared with the private milling companies,” BCE said. “They also benefit from low or no finance charges nor taxes.

“Egypt’s private flour milling sector uses modern milling technology and consists of a further 36 private mills with a total milling capacity of 2.8 million tonnes per year,” it said

Egypt’s primary flour type is 82% extraction flour mainly used for the subsidized “baladi” bread, it explained. “The marketing of this flour is totally regulated through GASC. According to GASC, they need to produce 270 million loaves of the subsidized baladi bread a day to feed the country’s low-income population.”

Political turmoil

The political changes in Egypt since the revolution of 2011 and the ouster of President Mohamed Morsi have created some problems with supply.

“Most press sources and observers report that Egypt’s political crisis is deflating hopes for a quick economic recovery,” the USDA attaché said in a recent report. “With the $12 billion in financial aid pledged in July 2013 (i.e., loans, grants, and fuel shipments) from Saudi Arabia and other Gulf allies opposed to the Muslim Brotherhood, Egypt’s financial collapse was averted.

“Egypt’s economic recovery remains elusive; concerns with security and curfews are causing logistical delays,” it said. “Aid commitments have been instrumental in stabilizing the Egyptian Pound, improving the country’s ability to pay for vital food and fuel imports on average amounting to roughly $2 billion per month,” the attaché said. “FAS Cairo estimates that current wheat stocks (domestic production plus imports) are sufficient to carry Egypt through January 2014.”

The report, dated Aug. 23, said that since July 2, Egypt’s Ministry of Supply and Internal Trade (MoSIT), GASC had bought more 1 million tonnes of wheat, mostly from Ukraine and Romania.

A Reuters’ story quoted Mohamed Abu Shadi, the country’s new minister of supplies after President Morsi was removed, as saying that Morsi’s biggest mistake was to dramatically reduce wheat imports. Reuters quoted officials as blaming a lack of money and “a quixotic attempt at making Egypt self-sufficient.”

“Morsi dreamt of making Egypt grow all its own wheat and allowed imported stocks to fall to precariously low levels. It hurt both the country’s wheat stocks and Morsi’s government.

“With a quarter of Egypt’s 84 million people living below the poverty line of $1.65 a day, millions depend on subsidized bread that sells for less than 1 U.S. cent per loaf,” it said. “That supply relies on foreign wheat.”

Many people were disconcerted and unhappy with the government for making statements that we would become self-sufficient, said Adel Beshai, professor of economics at Cairo’s American University.

“Every villager knows we cannot become self-sufficient,” he said. “Any illiterate farmer could tell you we could not be self-sufficient, so people felt they were being lied to.”

Small oilseed crop

According to the attaché, cottonseed, soybeans, and sunflower seed form the bulk of Egypt’s relatively small oilseed crop. A report dated at the end of May puts total cotton planted area in marketing year 2013-14 at 130,000 hectares, down by over 9%.

“We find that the decrease in total cotton planted area will adversely impact cottonseed, which at 138,000 tonnes will be down by 8%,” the report said. “Over the past couple of seasons, we are seeing farmers shy away from cotton in favor of the more profitable coarse grains (corn) and rice cultivation,” it said.

It forecast the area and production of soybeans in 2013-14 “relatively stable” at about 11,000 hectares and 28,000 tonnes.

“Soybean meal is the Egyptian poultry industry’s main feed component,” it said. “The local poultry industry remains buffeted by avian influenza. High feed and fuel costs along with avian influenza have now shuttered half of Egypt’s poultry farms, leading to a drop in demand for soybean meal and other feeds.”

The report forecast a 20% increase in sunflower area to about 6,000 hectares, with production up over 21% at 17,000 tonnes.

“There are 13 oilseed crushing companies with total crush capacity of 9,100 tonnes per day, but the actual production is only 5,725 tonnes per day,” the attaché said. “The crushers primarily produce soybean oil.

“Sources indicate that two private companies (National for Vegetable Oils ‘Cargill’ and Alexandria Company for Seed Processing and Derivatives ‘Alex Seeds’) handle almost 80% or 4,700 tonnes per day of the actual crush while the other 11 companies are providing the other 20%,” it said. “Eighty-five percent of domestic edible oil production is consumed through the national ration card system.”

Chris Lyddon is World Grain’s European editor. He may be contacted at: chris.lyddon@ntlworld.com.

Key Facts
Capital: Cairo
Population: 85,294,388 (July 2013 est.)
Religions: Muslim (mostly Sunni) 90%, Coptic 9%, other Christian 1%.
Location: Northern Africa, bordering the Mediterranean Sea, between Libya and the Gaza Strip, and the Red Sea north of Sudan, and includes the Asian Sinai Peninsula.
Government: Republic. Chief of State: Interim President Adly Mansour (since July 2013); head of government: Interim Prime Minister Hazem el-Beblawi (since July 2013).
Economy: Occupying the northeast corner of the African continent, Egypt is bisected by the highly fertile Nile valley, where most economic activity takes place. Egypt’s economy was highly centralized during the rule of former President Gamal Abdel Nasser but opened up considerably under former Presidents Anwar El-Sadat and Mohamed Hosni Mubarak. Cairo from 2004 to 2008 aggressively pursued economic reforms to attract foreign investment and facilitate GDP growth. Despite the relatively high levels of economic growth in recent years, living conditions for the average Egyptian remained poor and contributed to public discontent. After unrest erupted in January 2011, the Egyptian government backtracked on economic reforms, drastically increasing social spending to address public dissatisfaction, but political uncertainty at the same time caused economic growth to slow significantly, reducing the government’s revenues. Tourism, manufacturing and construction were among the hardest hit sectors of the Egyptian economy, and economic growth is likely to remain slow during the next several years. The government drew down foreign exchange reserves by more than 50% in 2011 and 2012 to support the Egyptian pound and the dearth of foreign financial assistance — as a result of unsuccessful negotiations with the International Monetary Fund over a multi-billion dollar loan agreement which have dragged on more than 20 months — could precipitate fiscal and balance of payments crises in 2013.
GDP per capita: $6,700 (2012 est.); inflation: 7.1% (2012 est.); unemployment: 13.5% (2012 est.).
Currency: Egyptian pounds (EGP): 6.894 pounds equal 1 U.S. dollar (Oct. 22, 2013).
Exports: $26.83 billion (2012 est.): crude oil and petroleum products, cotton, textiles, metal products, chemicals, processed food.
Imports: $59.72 billion (2012 est.): machinery and equipment, foodstuffs, chemicals, wood products, fuels.
Major crops/agricultural products: Cotton, rice, corn, wheat, beans, fruits, vegetables; cattle, water buffalo, sheep, goats.
Agriculture: 14.7% of GDP and 32% of the labor force.
Internet: Code: .eg; 200,430 (2012) hosts and 20.136 million (2009) users.