File Photo: A farmer looks as he stands near a field where rice straw was burned in preparation for the next harvest, at a paddy field in the beginning of an agricultural road leading to Cairo, Egypt in this November 1, 2014 (Photo: Reuters)
The Egyptian government has reached an agreement with private rice mills to produce white rice domestically, potentially ending a standoff over the buying price of last year's crop that has led to millions of tonnes of paddy sitting idle since the harvest.
The supply ministry said this week it had agreed to pay private mills EGP 6.3 ($0.3784) per kilogramme of white rice, which the government would then sell at its outlets for EGP 6.5 per kg.
Farmers last year refused to sell government mills their crops despite a plentiful harvest, arguing that the buying price of EGP 2,400 ($270.27) per tonne of rice paddy was too low.
The new agreement means that private mills will instead buy up the paddy at the current market price of about EGP 4,200 before selling it on to the government.
Last year, the long-held paddy stocks forced up local rice prices and intermittently made supplies at government outlets scarce, forcing state grain buyer GASC to import 75,000 tonnes of medium grain rice despite a local surplus and a hard currency shortage.
Egypt's annual consumption of rice is about 3.95 million tonnes whereas production is about 5.1 million tonnes, according to a United States Department of Agriculture report.
Mostafa El-Naggari, head of the rice committee of Egypt's agricultural export council, estimates that about 3.9 million tonnes of rice paddy remains in the hands of farmers and traders as a result of the standoff.
Any subsequent jump in the local paddy price, however, could make the recently struck deal untenable given the tight profit margin agreed to by the private mills under the new deal.
"If the price of paddy jumps 100 or 150 pounds, the mills will not be able to distribute it," Naggari said.