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Egypt’s efforts to safeguard wheat supply amid global challenges

21 February 20247 min reading

Dr. Mahmoud Riyad
Egyptian Milling Association
Secretary-General


Egypt, the world’s largest wheat importer, faces significant challenges in securing its wheat supply, primarily due to economic hurdles and global events. With an annual wheat production of 8 million tons falling far short of the consumption needs, the nation heavily relies on imports, making it susceptible to disruptions in the global grain market.

Egypt, the most populous country in the Arab world, stands as the globe’s largest importer of wheat, with this essential grain serving as the cornerstone of the Egyptian diet. Egypt boasts one of the highest per capita wheat consumption rates in the world. Despite its population exceeding 100 million, the annual wheat production of 8 million tonnes falls significantly short of meeting domestic consumption demands. Consequently, Egypt relies heavily on wheat imports to bridge this gap. It consumes up to 21 million tons of wheat, with approximately 12 million tons imported. In other words, the country produces less than half of what it consumes, making it extremely vulnerable to global grain market disruptions. In recent years, economic obstacles exacerbated by geopolitical events have presented formidable challenges, complicating the nation’s ability to secure an adequate wheat supply through imports.

The economic situation in Egypt has been challenged by the impact of Russia’s invasion of Ukraine and global inflationary pressures. Global events have contributed to the devaluation of the Egyptian pound, high inflation, and a lack of foreign currency. Due to the increase in wheat prices because of the Russian war in Ukraine, the Egyptian government doubled its budget for wheat purchases to $6 billion in 2023. The Russian invasion also caused domestic food prices to skyrocket and restricted the availability of foreign currency for imports - further harming access to raw feed materials.

Additionally, the foreign currency crunch was exacerbated by a decrease in tourism, as Egypt is heavily reliant upon tourism for U.S. dollars. Before the Russian war in Ukraine, Russians and Ukrainians represented a large percentage of tourists, and with the ongoing Israeli-Hamas crisis, tourism has further declined.

Other global factors have threatened Egypt’s ability to import agricultural commodities such as an increased demand of agricultural imports led by China; reduced supplies due to drought; tightened supplies of wheat, corn, and soybeans from major exporting countries; high energy prices which increased prices for fertilizers, transportation, and agricultural production; and countries imposing export bans of some agricultural products.

Since early 2022, the lack of foreign currency has led to a slowdown in overall imports and a backlog of commodities stuck at the port. The backlog of shipments caused significant hikes in food prices. At the end of October 2023, Egypt’s Central Bank reported annual inflation at 35.6 percent - primarily driven by a 71.7 percent increase in food prices compared to October 2022. More than inflation, the lack of foreign currency continues to be the main issue hindering business in Egypt. Egypt’s imports of all agricultural commodities fell by 17.8 percent from January-September 2023, compared to the same period in 2022. Consequently, consumers will continue to lose purchasing power and will focus on basic commodities until there is a significant reduction in food inflation. Households will most likely limit their food spending in real terms and will focus much more on staples, such as bread and rice.

According to the Central Agency for Public Mobilization and Statistics (CAMPAS), 88.5 percent of Egyptian families use the country’s food subsidy system. In recent years, the government introduced several reforms to make the system more efficient and to try to maintain Egypt’s consumption patterns. The Egyptian government allocates bread subsidy beneficiaries of 150 loaves of bread per month. Baladi bread is sold at a subsidized price of 0.05 EGP/loaf while the actual current cost is estimated at an average of 0.9 EGP/loaf, as the government compensates bakeries for the difference in production cost. In fiscal year 2023/24 (June – July) Egypt allocated almost 4.1 billion USD for food subsidies, with 2.98 billion USD earmarked for the bread subsidy.

Source: Trade Data Monitor LLC and FAS Cairo Research 

Egypt currently has more than 410 public, public/private, and private sector mills. The private sector mills that produce 82 percent extraction flour for the bread subsidy program are not allowed to produce the 72 percent extraction flour produced by other private sector mills, which is used in the production of European and white flatbread (non-subsidized) as well as baked products, cakes, biscuits, wafers, croissants, and pastries, etc. Currently, there are 5,000 private bakeries and patisseries producing these baked products. Private baked products at have seen a decrease in consumption by 10- 15 percent due to rising prices of end products.

WHEAT OUTPUT DECLINES 

Wheat production in the 2023/24 season (July – June) is estimated at 8.87 million tons, down 6.63 percent from the previous season. This is due to the area harvested, decreasing to 1.35 million hectares compared to 1.45 million hectares in the 2022/23 season. The decrease in area is driven by the increased area of Egyptian clover and sugar beets. In Egypt, wheat is generally planted in November and harvested in April.

WHEAT CONSUMPTION SURGES

Wheat consumption in the 2023/24 season is estimated at 20.6 million tons, up by 50,000 mt from the previous season. This is due to an increase in food, seed, and industrial use (FSI) consumption. The rise in FSI wheat consumption is attributable to population growth. Egypt has a population of more than 105 million, according to the CAPMAS. In addition to the local population, Egypt is also host to an estimated nine million migrants from Iraq, Syria, Libya, Yemen, and Sudan. Egypt’s population (excluding immigrants) is expected to reach 124 million by 2030.

WHEAT IMPORTS SET TO CLIMB TO 12 MILLION TONS

Egypt is the world’s largest wheat importer and has been adversely affected by Russia’s invasion of Ukraine, as high wheat prices have increased and caused Egypt to seek more Russian wheat imports. According to USDA, estimated 2023/24 season wheat imports are 12 million tons, up by almost 7 percent from the previous season.

The largest exporters to Egypt in the last season were Russia (8.1 million tons), the EU (1.8 million tons), Ukraine (856,377 mt), and Australia (172,015 mt). General Authority For Supply Commodities (GASC) wheat imports accounted for 50.5 percent of total imports in calendar year 2023 (Jan- August), while the private sector accounted for the rest. In the five years, the private industry has increased its market share of wheat imports as it has increased its production of flour distributed to private bakeries, café and patisserie producing high-quality products.

GASC tenders during the current season resulted in purchasing 1.6 million tons from international markets. Of this amount, 1.12 million tons was purchased from Russia, 360,000 mt from Romania, and 120,000 mt from France. GASC imports in 2023/24 are expected to be between 5- 5.5 million tons.

Egypt received support from international donors including the World Bank, the International Islamic Trade Finance Corporation (IFTC) and the African Development Bank (AFDB) to finance wheat purchases in foreign currency, in addition to ongoing cooperation with various international agencies and entities to enhance food security. The latest of these financing agreements is a $500 million financing agreement with the Abu Dhabi Exports Office, and Al Dahra Co, an Abu Dhabi agribusiness. They will supply wheat to Egypt under a 5-year agreement starting in 2023. The agreement, worth $100 million per year, will provide Egypt with a relatively small portion of the high-quality milling wheat either through direct purchases or tenders.

According to the USDA, the ending wheat stocks for the 2023/24 season are estimated to be 4 million tons. Since the initiation of the National Project of Silos in 2021, Egypt has focused on augmenting its wheat storage capacity. Presently, the country boasts 75 silos, a significant increase from the 40 in operation back in 2014. Notably, the storage capacity of these silos has surged to 3.6 million tons in 2023, a substantial rise from the 1.2 million tons recorded in 2014.

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