Prioritising security on wheat

Niveen Wahish , Saturday 23 Apr 2022

The government is diversifying international suppliers and providing additional incentives to local farmers in efforts to manage rising wheat prices in the wake of the conflict in Ukraine.

Prioritising security on wheat
The new local wheat harvest takes place between mid-May and June


Egypt’s Ministry of Agriculture announced last week that it was adding India to the list of countries from which it could source wheat in a decision that came following visits by Egyptian agriculture and pest-analysis officials to port facilities and farms in India.

The addition is part of government efforts to diversify wheat supplies following disruptions because of the war in Ukraine. According to Reuters, India is heading for a record wheat harvest this year thanks to favourable weather conditions in the major wheat-growing areas.

More than 80 per cent of Egypt’s wheat imports originate from Russia and Ukraine. While supplies from Russia have continued to come through, the blockades of Ukrainian ports have prevented shipments from leaving and pushed exporters to send their crop abroad by rail.

Egypt has enough wheat to cover the next 2.6 months’ worth of consumption, Cabinet Spokesman Nader Saad said earlier this month. These stocks will soon be replenished by the new harvest that takes place in April in new areas reclaimed from the desert, said Salah Abdel-Meguid, former head of the wheat research department at the Agricultural Research Centre.

In the rest of the country, the harvest takes place between mid-May and mid-June.

Domestic and imported wheat is needed to produce the subsidised bread from which more than 70 million people benefit.

Besides India, Egypt is also reported to be contemplating wheat imports from Pakistan, Mexico, Argentina, and the US. While there are plenty of sources of wheat internationally, price is a determining factor, Abdel-Meguid told Al-Ahram Weekly.

Since Egypt requires some 13 million tons of wheat imports, higher prices mean a bigger hard-currency bill for the country. Egypt’s is the world’s largest wheat importer. The US department of agriculture’s Foreign Agriculture Service forecasts Egypt’s wheat imports in 2021-22 at 13.2 million tons.

While the harvest of the domestic crop is imminent, there is still a need to secure further stocks for next year. The General Authority for Supply Commodities (GASC) last week made its first international wheat purchases since the war in Ukraine broke out, buying 350,000 tons of wheat from France, Russia, and Bulgaria at more than $450 per ton, the highest figure in nearly six years.

Besides seeking wheat from new destinations, the government is encouraging local farmers to deliver as much wheat as possible. While it has increased the price per ardab of wheat (150 kg) by LE65 to between LE865 and LE885, Abdel-Meguid said it could do better.

He hopes it will raise the delivery price to LE1,000 per ardab to encourage farmers to deliver more of their harvest. Another determining factor will also be to pay farmers for their crop straight away, he added, as in previous years there were instances when payments were delayed, leading to complaints from farmers.

High-quality Egyptian wheat is mixed with imported wheat to improve the overall quality and used for the bread subsidy programme.

Hisham Al-Naggar, CEO of the Daltex Corporation which cultivates wheat in newly reclaimed areas, agrees that the delivery price should not be less than LE1,000 per ardab if the government wants farmers not only to deliver their crop, but also to keep cultivating wheat in the next season.

He said he understood the dilemma and the pressure that higher wheat prices are placing on the government budget, but said that a higher delivery price would be a good investment that would encourage farmers to cultivate larger areas of wheat in the future.

While the government bought wheat at last week’s tender price of above LE8,000 per ton, it is will be paying local farmers around LE6,000.

The government currently spends LE51 billion to subsidise around 270 million loaves of bread produced daily, a statement by the Ministry of Supply issued in February said. Reforming the subsidy system is on the government radar, however, and officials have said that the price, which has stood at LE0.05 per loaf for decades, needs to increase.

The government has said it subsidises each loaf by LE0.65, and officials have mentioned possible moves to introduce targeted cash transfers instead. However, some economists have warned that continuing the bread subsidies is important to protect the poor from hunger.

In March, the minister of finance said that higher wheat prices would cost the budget an additional LE12 to LE15 billion. The figure is estimated to be much higher now, following the runaway prices witnessed at the latest GASC tender last week.

The government hopes to collect six million tons of wheat from local farmers this year, up from 3.6 million in 2020. It is also implementing strict rules on wheat deliveries, saying that it expects a minimum delivery of 12 ardab per feddan from farmers and threatening legal action against those selling their crop outside the system.

It also said violators would be deprived of subsidised fertilisers and other forms of support. The owners of large farms who deliver at least 90 per cent of their production will receive subsidised fertilisers for summer crops, it said.

This year is ideal for wheat cultivation, Abdel-Sayed said, adding that he expects the average yield to range from between 19.5 to 20 ardab per feddan, which would mean one million tons of extra crop and could mean a bumper crop of 10 million tons.

The US Department of Agriculture Foreign Agriculture Service forecasts Egypt’s wheat production in the marketing year 2021-22 to reach nine million metric tons, up by 1.12 per cent over the 8.9 million in the previous marketing year.

It attributed the rise to an increase in the total area harvested to 1.4 million hectares, up from 1.39 million the year before.

Abdel-Meguid hopes for a successful harvest season this year, but he also warned that there could be wastage of up to 25 per cent of the crop during the harvest and in the bread-manufacturing process.

The future of Egyptian wheat cultivation lay in the newly reclaimed areas, where, with proper investment, productivity per feddan could reach as high as 22 ardab, he said.

*A version of this article appears in print in the 21 April, 2022 edition of Al-Ahram Weekly.

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