Home Opinion Featured Articles Egypt Improving food security

Egypt Improving food security


As the world?s largest wheat importer, Egypt is increasing its domestic grain production, in a bid to reduce its dependency on volatile international markets and to meet rising demand from its 85m people, but with rising production unlikely to satisfy domestic consumption, import volumes are expected to rise in the coming three years.

The General Authority for Supply Commodities (GASC), the state grain-buying organisation, announced in early June that it has purchased 2.6m tonnes of locally grown wheat in the 2011/12 season, up some 400,000 tonnes in 2011. The season ends on July 15, by which time the authority aims to have secured 3m tonnes of Egyptian wheat, up from 2.6m last year.

The increasing purchases of domestic wheat should help Egypt reduce its imports this year, but crucially, the larger-than-normal bulk buys come on the back of a surprising jump in cultivation and production from local farmers.

Domestic wheat output rose 17% to 8.4m tonnes in the 2010-11 season, considerably more than the average of 7.9m tonnes over the past five years, due to an increase in cultivated area improved seeds and higher prices paid to domestic farmers by the government. Since October 2011, farmers have received LE380 (? 49) per 140 kg, up from LE350 (? 45.50) last season, in an attempt to incentivise wheat production.

The UN?s Food and Agriculture Organisation (FAO) has reported that the outlook for the 2012 winter cereal crop ? which is harvested from April ? is ?generally favourable?. Its initial forecasts suggest wheat output of 8.46m tonnes, similar to the good yield in 2011.

Overall, the FAO forecasts that Egypt?s cereal production will reach 22.66m tonnes in 2012, up 2% from 22.23m tonnes in 2011, and above the 22.22m-tonne average in the 2007-11 period. It expects corn production to rise 3.1% in 2012, from 7.32m to 7.55m tonnes, and rice paddy output to reach 5.8m tonnes.

The improved cultivation figures come about as a result of several factors. Raising purchase prices and the use of better seeds has already paid dividends; other moves that could support production increases include encouraging greater consolidation and mechanisation of farms. At present, landholdings tend to be rather fragmented and small and medium-sized enterprises in the sector are not always efficient.

The past year has also seen renewed interest in Egypt?s two biggest desert-reclamation agricultural schemes, Toshka in the far south, and the North Sinai Agricultural Development Project (NSADP) on the Sinai Peninsula, which together would see around 400,000 ha of desert converted for agriculture. In February 2012 the government announced it had completed 94.4% of the infrastructure for the NSADP, including irrigation canals, pumping stations and bridges.

The FAO agrees that Egypt?s grain import bill should fall in 2011-12, due to high levels of local production and cheaper wheat imports, after Russia lifted its export ban in July 2011. However, it warns that in the longer term, import prices may rise again if the Egyptian pound weakens. The currency was widely expected to fall in 2012 due to the central bank?s limited scope to maintain its value, but it appears the chances of a sharp fall are lessening. Key revenue generators, such as energy, Suez Canal fees and remittances from Egyptians living abroad have kept the economy moving forward. Additionally, the installation of a new president following the run-off election in June could bring greater political stability and clarity, encouraging the flow of demand and investment that has been held back over the past year.

However, in spite of the improved domestic output, massive levels of consumption mean Egypt?s import volumes are likely to grow in the medium term, as rising output is unlikely to keep pace with demand growth in the near term. The FAO expects total cereal imports to rise to 16.67m tonnes in the 2011/12 season, up from 16.06m the previous year and well above the 14.11m-tonne average in the 2007-11 period.

As a result, the GASC is seeking to secure and diversify long-term supplies, particularly in the wake of shutdowns in exports by Russia and Ukraine, among others, in recent years. On June 3 the GASC announced it was considering Poland as a potential wheat supplier due to the high quality of its product.

Currently, the authority largely sources its wheat from the Black Sea region. Since July, it has acquired 3.24m tonnes from Russia, 180,000 tonnes from Romania, and 360,000 tonnes from Ukraine. In addition, it has purchased 300,000 tonnes from both France and Argentina, as well as 590,000 tonnes from the US and Canada.

Over the medium to long term, Egypt?s grain policy may also include elements of demand management. One of the reasons for its huge wheat demand is that the country has the world?s highest bread consumption per capita; generous subsidies mean that bread can be purchased for as little as LE0.05 (?0.007). It is widely acknowledged that Egypt?s subsidy regime cannot be maintained in its present state, given its cost to public finances and the market distortions it causes. Allowing prices for bread to rise would help control demand growth, but remain politically and socially sensitive.

In the short term, then, Egypt is likely to focus on increasing both domestic supply and ensuring that competitively priced and good-quality imports continue to flow.



Source: oxfordbusinessgroup

Send your news stories to newsghana101@gmail.com Follow News Ghana on Google News



Please enter your comment!
Please enter your name here

WP Radio
WP Radio
Exit mobile version