Egypt’s New Wheat Subsidy Will Not Affect Local Harvest Or Imports

Egypt’s wheat output will be little changed this season from last, Supplies Minister Khaled Hanafy said on Monday, not long after a subsidy reduction raised questions about whether farmers would continue to plant the crop.

The world’s largest importer of wheat will grow around 3.3 million feddans (3.43 million acres) in the next season, Hanafy told Reuters in an interview.

“I don’t expect this season to be less than this amount, and it might even be more,” Hanafy said.

This month Egypt said it would no longer pay a fixed, and highly subsidised, price to procure local wheat. It would instead pay farmers a small direct subsidy based on the size of their field.

The new subsidy infuriated some farmers who said they will no longer profit from growing wheat. Last year farmers sold their wheat to the government for as much as $200 per tonne over the global price as world wheat prices plummeted.

This price anomaly led to traders passing off cheap imported wheat as local when selling it to the government, traders and experts have said.

Traders said the new subsidy system is intended to end corruption.

“The new system will not benefit large investment companies, or intermediaries…because the procurement price is going to be the global price itself, unlike in the past,” said Hanafy, adding that the new system will instead help small farmers.

Hanafy said he expected wheat imports too to remain largely unchanged. Egypt imported roughly 11 million tonnes of wheat last year.

PRICE CONTROLS
In early November Egypt launched an initiative to control prices amid concerns about rising inflation. Last week the government identified 10 essential commodities it would target as part of the plan.

Annual consumer inflation rose to 9.7 percent in October, from 9.2 percent in September, largely on of rising food prices.

To curb these price rises Egypt said it would broaden the mandate of its state grain buyer, the General Authority for Supply Commodities (GASC), using it to import a broader array of essential items and also supply imported wheat to the private sector.

“GASC is going to have a big market share in a lot of goods until we have control over prices,” said Hanafy, who said the body is working with the central bank to ensure it has the requisite dollars, despite a currency crisis.

GASC’s recent wheat purchases for the private sector have already had a noticeable impact, Hanafy said.

“We have already imported wheat for the private sector and this has pushed down the price per tonne on the local market, from 2,450 Egyptian pounds per tonne to 1,950 pounds in just two weeks,” said Hanafy.

GASC launched its first international tender for poultry earlier this month as part of the initiative, but pressure from the local poultry industry made the body backtrack and instead contract with domestic poultry producers.

“The truth is that after rounds of negotiations with domestic poultry producers…we arrived at offers equivalent to those submitted from abroad,” said Hanafy, who added that future poultry tenders however are not off the table.

GASC will soon be holding “big tenders” to import meat, soy bean, and corn, as part of the price control plan, said Hanafy.

“GASC right now is the biggest businessman in Egypt and our decisions are going to have impact on the markets.”

Source: Reuters