New wheat incentives – Egypt – Al-Ahram Weekly
Farmers’ Union leader Hussein Abu Saddam hailed the government’s decision to increase wheat supply incentives this week by raising the price of wheat in the domestic market to LE 5,400 per tonne.
This is close to the world market price at LE 6,000 per ton. Abu Saddam said he would like to see the incentive increased even more so that the price of the domestic supply of wheat equals that of the world market, to the benefit of Egyptian farmers.
At its weekly meeting on March 16, the cabinet approved a special stimulus package of LE 65 per ton of wheat for supply and transport to be added to supply prices ranging from LE 865 to LE 885 per ardeb.
Neither the Ministry of Agriculture nor the Ministry of Supply indicated the expected increase in the price of wheat supplied by farmers after the rise in local supply prices.
Abu Saddam said that if this year’s wheat production reaches 10 million tons, the supply ministry should receive at least six million tons of local wheat.
Estimates are much higher than last season’s supplies, when the Agriculture Ministry said wheat production was over eight million tonnes but farmers only supplied 3.5 million tons.
He did not answer the question of what happens to the difference between the two numbers of production and supply.
Last year, Egypt imported nearly 10.5 million tons of wheat. The Ministry of Supply received half of this amount and used it to supply bakeries with the flour needed to make the subsidized bread.
The other half was imported by the private sector to operate macaroni factories, patisseries and bakeries. Last year, the subsidized bread consumed 5.5 million tonnes of imported wheat and 3.5 million tonnes of domestic wheat supplied by farmers to the Ministry of Supply.
A note from a former ministerial adviser attempted to answer the question of why farmers may be reluctant to supply wheat to the government, despite financial incentives.
He said farmers divide their wheat harvest every year and supply half to the government. The other half is processed by jarsh, or an incomplete grinding process, and used as fodder for cattle and sheep. This saves LE 5,750, which is the price of a ton of bran on the Egyptian market.
Bran is added to forage at 24% or 12% depending on the age of the cattle consuming it.
The memo cited a 2018 Agriculture Department report that looked at the 600,000-ton decline in wheat supplied by farmers to the Supply Department. He suggested the drop was due to the rise in the price of bran that year, prompting farmers to save more wheat and use it as fodder instead of buying it at higher prices. on the market.
Nader Noureddin, a former adviser to the minister of agriculture and a professor at Cairo University’s Faculty of Agriculture, said the problem stems from exaggerated estimates by the ministry of agriculture of annual cultivated areas and yields. expected.
“The state has forced all wheat producers in Egypt to supply wheat for the first time since this decision was abolished in 1993, the year of the trade liberalization law,” he said.
“It shows that the state needs every grain of wheat it can get and that it has prevented farmers from selling wheat to merchants, food and grain stores and macaroni factories, or sell green wheat, known as “freekeh”, or durum wheat, a staple food in Upper Egypt, as it needs the entire wheat crop to make subsidized bread.
Abu Saddam said harvesting wheat early in the season while still green to make ‘freekeh’ wastes 20% of production across the country.
Noureddin called on the government to redistribute the bran produced by milling wheat, so that farmers supplying a given amount of wheat would get a similar amount of bran at a subsidized price.
The price would be determined annually, in coordination between the Ministries of Supply and Agriculture.
The report says the state provides wheat to the mills in exchange for bran, and they are free to set the price of the bran they sell to farmers, traders and for fodder. He said the bran is overpriced in the domestic market at a production cost of LE 1,000 per ton, which includes the cost of electricity, labor and taxes.
Egyptian mills produce one ton of bran by grinding four tons of wheat, and its current market cost is LE 5,750 per ton. This means that one ton of sound generates LE 4,750 in profit.
The memo recommended that the state step in to buy bran from mills and resell it to farmers at a subsidized price to reverse their reluctance to supply wheat.
Prior to 1985, the Ministry of Agriculture was responsible for supplying the mills with wheat. It would then buy bran from mills and distribute it to farmers at subsidized prices to support farmers and reduce the cost of fodder.
Noureddin welcomed the recent decision to increase incentives for wheat suppliers. “It’s a very good incentive, bringing the price of Egyptian wheat closer to world prices,” he said. “It encourages farmers to provide the majority of their crop to the state.”
Noureddin said successive agriculture ministers have sidestepped the issue of the volume disparity between wheat production and the supply of wheat to state silos.
He said he did not believe farmers are hoarding the difference, more than 50% of production, for their household use, as they use ration cards to buy bread. Ration cards are used by 70 million people out of Egypt’s 100 million population.
Abu Saddam has suggested that the Agriculture Law contracts be revived for the wheat crop because of its strategic importance.
This would mean that the harvest would be bought in advance and farmers would also be supported with soft loans to cover production costs, instead of seeking finance from traders. Further loans to farmers should be facilitated so that they can purchase agricultural equipment to increase yields and maintain larger areas.
Noureddin said a balance has been restored in international wheat imports and between different world wheat producers to avoid dependence on food imports all from one source.
Egypt will resume importing wheat from various global producers, such as Australia, France, Romania, Hungary, Canada, the United States and Argentina, in anticipation of global food crises or droughts.
“Today, we are returning to a balance between many global wheat producers and no longer relying on a single source,” he said.
*A version of this article appeared in the March 24, 2022 edition of Al-Ahram Weekly.