Egypt left without Russian, Ukrainian grain tries to overcome crisis

Al-Monitor
Egypt left without Russian, Ukrainian grain tries to overcome crisis

Cairo turns to local producers to make up for the loss of Russian and Ukrainian wheat - with a carrot-and-stick approach, Middle East Eye writes.

Egypt is hoping that a new plan to rely on its own wheat reserves and local production will be enough to cover domestic consumption of the vital grain until 2023. Facing difficulties in importing wheat because of the ongoing Russian operation in Ukraine - the two countries are the largest sources of wheat for Egypt - the government now has to increase dependence on local wheat. 

To achieve that goal, Egypt’s plan for self-sufficiency in 2022 is twofold. Firstly, the government has offered incentives to local wheat producers to encourage them to sell their produce to the government instead of the private sector.  Secondly, the minister of supply has issued a decision that regulates the sale of wheat by farmers, with a requirement to sell a certain amount to government-affiliated buyers. Those who do not comply could be punished by up to five years in jail.

The purchasing authorities specified in the decision are the Egyptian Holding Company for Silos and Storage, the General Company for Silos and Storage, the mill companies affiliated to the Holding Company for Food Industries, and the Egyptian Agricultural Bank. The decision that was declared on Wednesday, stipulated that whoever owns a crop of wheat for the 2022 harvest season must hand over to the above authorities part of the crop at a minimum of 12 ardebs (a unit of capacity used in Egypt equivalent to 5.62 US bushels) per acre.

It added that in the event of selling any quantities of wheat to the private sector prior to the decision, buyers must deliver the quantities specified in this decision to the authorities with the same terms and conditions that apply to the crop owners. The decision prohibited the sale of the remainder of wheat resulting from the 2022 harvest season to private entities without a permit from the Ministry of Supply and Internal Trade. The permit must include approval of the quantities and purpose of the purchase, as well as approval on storage places.

The 2022 plan

The Egyptian wheat harvest season is due to start next month and last until the end of June. The government needs to bring together around 10m tonnes of wheat to ensure a continual supply of bread for 72 million people registered in the nation's food rationing system. In 2021, Egypt imported around 18m tonnes of wheat, including six million by the government, while the remaining amount was imported by the private sector.  Almost 80 percent of this wheat came from Russia and Ukraine, 69.4 percent and 10.7 percent respectively.

When the Russia-Ukraine crisis erupted on 24 February, the government said it had four million tonnes of wheat available in its warehouses. The minister of agriculture then said the government wants to buy six million tonnes of wheat from local farmers. Added to the four million tonnes available already, these six million tonnes will make the 10 million tons of wheat needed for the production of bread for those enrolled in the national food rationing system. If it succeeds in collecting this amount of wheat, the government might not need to import additional amounts of wheat from other countries until the end of the year. Over the past few weeks, government officials have referred to incentives several times, with the nation preparing for the harvest season. 

During his meeting with a group of ministers on 13 March, President Abdel Fattah el-Sisi asked the government to offer incentives to wheat producers who would sell their output to the government. On Monday, Cabinet spokesman Nader Saad said the government would declare some stimulants to encourage wheat producers to sell their output to it, including providing subsidised fertilisers that would cover their needs during the summer season. "There will also be an increase in the price the government will pay to buy wheat from the farmers," Saad told a local TV channel.

Challenges

But the rising price of wheat and the incentives will add to Egypt's financial burdens in the wake of the Ukraine crisis.  On 6 March, Minister of Finance Mohamed Maeet revealed that Egypt would pay an additional $1bn for wheat imports because of the rise in the price of wheat on the international market. In the first nine months of 2021, the government imported 6.1m tonnes of wheat, coughing up $2.2bn, according to the national statistics authority, Central Agency for Public Mobilisation and Statistics. 

There are also a number of challenges to the government’s plan. Egypt has been working hard to increase the space it cultivates with wheat for economic, social, and political reasons. Bread is a staple for tens of millions of Egyptians, constituting the dominant part of their diet. Successive governments have recognised the importance of the price of bread. Dependence on foreign sources for wheat supply has always been viewed as an affront to national pride. This was why successive governments and presidents have used the cultivation of wheat as a key campaign issue.  This year, Egypt is cultivating 3.7m acres of its farmland - which is around 8.3m acres in total - with wheat. This is around 415,000 acres more than the space cultivated with wheat in the previous year. 

Sisi's government has also launched a large number of land reclamation projects, including in Egypt's vast deserts, to increase the cultivable space and national wheat production. 

However, self-sufficiency in wheat appears to be a dream far from easy to realise. Water scarcity is one of the challenges to this self-sufficiency, specialists said.  "Water has always been the main challenge to achieving self-sufficiency in wheat production," Alaa Azouz, a senior Ministry of Agriculture official, told Middle East Eye. 

With 55.5bn cubic metres of water from the Nile River its only source of freshwater, every year, Egypt is water-poor already, especially given its growing population of 102 million.Egypt's Nile water share covers less than 50 percent of its needs, and the country has had to depend on underground water and treated water for the remaining amount, according to the government. 

Egypt also faces a problem when it comes to its wheat storage capacity. In 2014, the Arab country had a capacity to store 1.5m tonnes of wheat. But the warehouses available at the time were outdated and caused a massive loss of the crop.

In the past few years, Egypt succeeded in increasing its wheat storage capacity to 3.4m tonnes, having constructed a large number of modern silos, investing tens of billions of pounds in this process. But this still means that, even if the government succeeds in collecting 5.5 million tonnes of wheat from local producers between April and the end of June, it will not have enough storage for this amount of wheat, specialists said.  "The wheat storage capacity will be a challenging issue as the government tries to collect as much wheat from local farmers as possible," Hussein Abu Saddam, the head of the Farmers Union, the independent guild of the nation's farmers, told MEE.

The government says, however, that it has enough storage capacity for the amounts of wheat it wants to collect. Ministry of Agriculture spokesman Mohamed al-Qersh, said that apart from the silos operated by his ministry, the Ministry of Supply would also make its warehouses available for the storage of wheat during the harvest season. "Together with our silos, these warehouses will be enough to accommodate the amount of wheat we want to buy from the farmers in the harvest season," al-Qersh told MEE. 

Lack of clarity

Egypt has taken a series of measures in the wake of the Ukraine crisis to ensure a sufficient supply of food to its people. The measures included a ban on the export of a number of food items, including wheat, fava beans, lentils, and pasta.  The government also said it would work to diversify the sources of wheat supply. "We have a list of 14 suppliers, from which we can get our wheat," Saad, the cabinet spokesman, said on 23 February.

Tens of thousands of tonnes of wheat arrived in Egypt in the past few days from Russia, Ukraine, and Romania, demonstrating the government's ability to maintain an uninterrupted supply of the essential grain from the international market. 

Nevertheless, the lack of a clear plan looks worrying to some local experts who call on the government to determine its list of alternative suppliers. "The presence of a clear import plan, including a list of alternative suppliers, will send assurances to the public," agricultural economics expert Gamal Seyam told MEE. "This clarity also will stabilise prices in the local market, including the price of bread."

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