Farmers harvest rice in the home town of Egyptian President Mohamed Morsi (Photo: Reuters )
Four months after Egypt approved plans for allowing the sale abroad of its medium-grain rice, exporters complain government regulations, namely export tariffs, are preventing their return to the market.
"The conditions are too tough, a lot of people got the export licences but are now stuck with them as they can't sell abroad," exporter Salah Abdel El-Aziz, chairman of the board of El Alamia 2000 Rice Mills, said on the sidelines of the Gulfood trade exhibition in Dubai.
In October Egypt said it would allow the export of rice on condition that traders sell the government one tonne of rice at 2,000 Egyptian pounds ($262) for every tonne of rice they export. Exporters also have to pay a tariff of $280 on every tonne exported.
The value of one tonne of rice is around 3,500 pounds a tonne, exporters said.
Abel El-Aziz said he bought a licence to export 500 tonnes but has failed to do so since then.
"Effectively, what you are doing is paying the government around $480 a tonne to export while the value of the rice is around $400 which makes you end up with a cost and freight price of around $880 a tonne," another rice exporter, Adham El Welely, executive director of El Welely group, said.
Egypt, which produced around 4.3 million tonnes of rice in the 2014 season, only consumes around 3.3 million tonnes.
Egyptian medium grain rice mainly competes with U.S., Russian and Italian rice on the international market with some rice from those countries selling for around $750 a tonne.
"We used to export around 120,000 tonnes a year before the ban was imposed, mainly to Middle East markets such as Syria, Turkey, Kuwait and Dubai," El Welely said.
El Welely has licences to export around 5,000 tonnes under the new system and has so far exported around 1,000 tonnes, mainly to Syria.
Egypt first imposed a ban on exports in 2008 saying it needed to save the rice for local consumption and wanted to discourage rice farmers from growing the crop to save water.
However, rice exporters have complained that the ban on free exports has led to illicit trading.
"When smugglers sell the rice at $750 a tonne they make an almost 100 percent profit on it and there are a million ways they find to do that," Karim Otabachi, import and export manager of Egyptian grains trader Wakalex said.
One way is to buy cheaper Indian rice for re-export and then substitute those exports with Egyptian rice, leaving the Indian rice to be sold on the local market instead.