Cut off from Black Sea wheat imports, Egypt leans on local harvest

Estimated reading time: 5 minutes

Author: Reuters

Cut off from much of the Black Sea wheat it depended on by Russia's invasion of Ukraine, Egypt, often the world's biggest importer, is straining to extract whatever it can from a local harvest, now in full flow.

The government, which provides steeply-subsidised bread to more than 70 million of Egypt's estimated 103 million people, has set an ambitious target to buy six million tonnes of domestic wheat this year, two-thirds more than in either of the previous two years.

Silo workers, like Nasser, are putting in extra hours. "We're supposed to leave at 4 pm. But this year especially, we sometimes work until midnight," he said, as dust from the offloading chamber beneath towering silos filled the air.

After a slow start, farmers and officials say the harvest is going well, but both the farmers and the government are still under an unusual amount of pressure.

Egypt's food subsidy programme requires around nine million tonnes of wheat per year. Last year, the government imported 4.7 million tonnes, much of it from Russia and Ukraine, and it has purchased about 1.9 million tonnes of foreign wheat for shipment in 2022, so far. Some 300,000 tonnes are stranded in Ukraine, with future prices and supplies uncertain.

As it seeks to shore up wheat reserves, the government says farmers must supply at least 60 per cent of their crop to the State, up from the 40 per cent it bought last year. It is imposing fines and even jail on those who do not comply.

The rules are meant to prevent farmers from holding back more of their crop for animal feed, and traders from selling the wheat on the open market.

The government has also raised its procurement price by 22 per cent from last year, to $311.23-$318.40 per tonne, though that is still well below international prices and some farmers say it is not enough, given rising input and labour costs.

Third-Party trading

In Banha, north of Cairo, 59-year-old farmer, Ahmed Samir, says he planted less wheat on his typically sized three-feddan (acre) farm this year because of the high price of labour and other inputs.

He plans to sell about two-thirds of his wheat to the government, keeping the rest for household consumption.

"In light of the high costs, the procurement price isn't that great. It's just an improvement," he said, as a worker behind him bundled wheat into a huge sack.

Despite the dissatisfaction, farmers say selling to the government is convenient, and guarantees payment for those who are in debt or in need of quick money. As of Thursday, the government had procured 3 million tonnes from the local harvest, which runs till July.

The bigger challenge for the government could be third-party trading, which it is trying to restrict by requiring farmers to seek a permit to sell wheat on the market after meeting their quotas.

International wheat prices, usually lower than those for Egyptian wheat, have risen to about $450 per tonne at Egypt's last tender in April, compared with the $318 per tonne it paid in February, giving traders an incentive to buy up local wheat.

According to two private sector traders, some private mills have been offering 7,000 Egyptian pounds ($377) per tonne for local wheat, around 1,100 Egyptian pounds ($59) more than what the government is offering, but still well below the international price.

News reports of the government seizing hundreds of tonnes of illegally-traded wheat from private mills have dominated local headlines in recent weeks.

Farmers' struggles with rising costs of inputs, including fertiliser and labour, also raise questions over a long-standing push to use scarce arable land and water to expand wheat production and increase self-sufficiency.

Hamada, a 45 year-old farmer in the province of Minya, 220 kms (137 miles) south of Cairo, says he planted more wheat this year, encouraged by the higher procurement price. But he soon realised it came with a cost.

"I deal with other things now. Labour wages rose, electricity, chemicals, everything rose," he said, adding that he still owes 200,000 Egyptian pounds ($10,790) in electricity bills.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.

Source: Middle East Monitor under CC BY-NC-SA 4.0