Will halting of Egypt's Abu Qurqas factory production lead to resurgence in sugar prices?

Asmaa Mostafa , Monday 15 Jan 2024

The historic Abu Qurqas Sugar Factory decided to halt cane sugar production after 155 years, due to a sharp reduction in sugar cane supply to the factory, Issam El-Din El-Badawi, head of the Egyptian Sugar and Integrated Industries Company (ESIIC) affiliated with the Ministry of Supply and Internal Trade, said on Sunday.

A photo showing a group of people crowding to buy kilograms of sugar.
A photo showing a group of people crowding to buy kilograms of sugar.


El-Badawi further disclosed that although the factory received an annual supply of 750,000 tons of sugar cane until 2020, the amount supplied in 2023 dwindled to 90,000 tons, which incurred losses of EGP 112 million.

In 2024, the supply plummeted to a mere 10,000 tons, which is “barely sufficient to operate for five days.” Therefore, the factory has deemed it necessary to completely cease cane sugar production and instead focus solely on beet sugar production, El-Badawi noted during a phone call with the Al-Hekaya TV show on MBC Misr.

He attributed the decline in sugar cane supply not to reduced production but rather to "unfair competition," as other entities offer farmers purchase prices that are double what the factory offers, leading to a diversion of supply away from the factory.

Ahram Online (AO) delved into the insights of three related sources to analyze the potential impact of this decision on the already skyrocketing sugar prices.

This decision would not impact sugar prices in the market since all production from the company's factories is allocated for ration cards rather than free consumption, said Hassan El-Fandi, head of the Sugar Division in the Chamber of Food Industries in the Federation of Industries. 

“The shortfall in sugarcane production at Abu Qurqas would be compensated by the output of the other seven ESIIC-affiliated factories,” El-Fandi told AO.

Similarly, Hazem El-Menoufy, head of the Food Division at the Federation of Egyptian Chambers of Commerce (FEDCOC), stated that this decision would not affect sugar prices in the foreseeable future.

“Egypt currently possesses 14 other sugar production factories, which can mitigate any potential impact,” El-Menoufy said.

In contrast, Medhat Nafei, former advisor to the minister of supply and internal trade, contended that this decision would inevitably impact sugar prices, potentially causing them to worsen. “However, the extent of the price increase remains uncertain,” he noted.

Nafei also indicated that the country's directive to expand wheat cultivation to hedge against the global price surge due to the Russia-Ukraine conflict had resulted in a decline in sugar beet cultivation.

To navigate this crisis, Nafei suggested encouraging farmers to expand both sugar cane and sugar beet cultivation, while factories should adjust purchasing prices to offer adequate remuneration to farmers.

Egypt has been grappling with a severe sugar crisis in recent months, with market prices soaring to EGP 50 per kilogram.

The government has taken steps to alleviate this crisis, including increasing amounts of subsidized sugar, implementing initiatives to reduce prices, imposing temporary bans on exports, and intensifying control measures.

However, sugar prices remain far from the targeted level of EGP 27 per kilogram.

The challenges faced by Egypt extend beyond the sugar market, with rising prices also affecting other essential commodities such as rice, onions, and eggs throughout 2023.

Consequently, inflation has surged, reaching 35.2 percent in December 2023 after a gradual deceleration trend started in October.

Furthermore, the prices of sugar and sugary foods have witnessed a 46.7 percent increase in December 2023 compared to 2022.

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