“COUNTRY FOCUS: EGYPT – stretching finite resources to meet burgeoning grain demand
Connecting Northeast Africa with the Middle East, Egypt boasts one of the most ancient histories on the African continent, tracing its roots to the Nile Delta dating back to the 6th-4th millennia BCE. According to the latest World Bank data, Egypt’s total population stands at 104.3 million, making it the third-most populous country in Africa, trailing only Nigeria and Ethiopia.
This population is projected to surge to 123 million by 2030 and further to 174 million by 2050, as per the United Nations World Population Prospects, exerting more pressure on the country’s limited agricultural resources. Achieving self-sufficiency in staple crops while prioritizing sustainable land and water usage are the cornerstones of Egypt’s present policies and developmental plans.
Grains occupy a central role in Egypt’s agricultural landscape
Grains occupy a central role in Egypt’s agricultural landscape. Consequently, Egyptian farmers cultivate crops across three seasons: two primary seasons, encompassing winter from October to April and summer from May to September, along with a third season referred to as “nili,” which spans from August to late autumn. During the winter, wheat, clover, sugar beets, and vegetables are the predominant crops, while rice, maize, cotton, and sorghum dominate the summer season. Maize, rice, and potatoes take center stage during the nili season.
One of the most pressing challenges Egypt has grappled with in recent decades is water scarcity. Located in an arid region, the country faces considerable hurdles in securing sufficient water resources for agriculture. The Nile Delta accounts for approximately 50% of Egypt’s agricultural lands and is home to roughly half of the nation’s 105 million population. The remaining 50% of food production areas are found in Middle and Upper Egypt. According to the Food and Agriculture Organization (FAO), Egypt has limited opportunities for expanding its water resources to meet domestic food demand, but the country is doing its best to push the boundaries over what its possible with whatever minimal resources it has.
An ambitious target to satisfy 70% of local wheat demand
Cereals constitute a fundamental component of the Egyptian diet, contributing to 62.3% of daily calorie intake. Per capita wheat consumption, the primary dietary staple in the country, averages around 180 kg per person per year, equating to 52.4% of calorie intake derived from cereals. Thus, nearly one-third of an individual’s daily calorie intake in Egypt is sourced from wheat.
Despite its limited water resources, Egypt remains the largest wheat producer in Africa but has never attained self-sufficiency. As global markets grow increasingly volatile, Egypt has set a goal to produce 12 million metric tons (MMT) of wheat this year from approximately 4 million feddans (about 1.68 million hectares). Reda Mohamed, the Director of the Field Crops Research Institute and Head of the National Campaign to Preserve Wheat, states that the nation aims to enhance production to meet 65-70% of local needs by 2030, up from the current 55%. The country is targeting to increase the area of the wheat crops by 1.5 million feddans over the next three years in an effort to get closer to its 2030 goal.
Consequently, the government has implemented measures to incentivize Egyptian farmers to boost wheat production. It has increased the grain’s purchase price by 42% and introduced an additional financial incentive for every 150 kilograms of wheat delivered to the government. The government is also actively promoting breeding programs and improved cropping practices to bolster production.
The impact of these government-led initiatives is becoming evident, with notable increases in the planted area, growing from 3.4 to 3.7 million feddans, and improved average yields, rising from 2.7 to 3 tonnes per feddan, owing to enhanced seed varieties and superior cropping practices. As a result, the United States Department of Agriculture (USDA) forecasts Egypt’s wheat production for MY 2023/2024 to reach 9.8 MMT.
In a bid to support local production, the Egyptian government has significantly expanded its wheat storage capacity to 3.6 MMT in 2023, up from 1.2MMT in 2014, marking a 200% increase, according to a state report.
These endeavors necessitate substantial financial commitments, prompting Egypt to seek partners to realize its 2030 wheat production target. In April, Egypt inked a €40 million (US$43.5M) grant agreement with the European Union (EU) in collaboration with the Italian Agency for Development Cooperation (AICS) to support wheat production in the country.
Growing population drives Egypt’s wheat imports
Despite being one of the largest wheat producers in Africa, Egypt maintains its status as the world’s largest wheat importer. Steady growth in wheat production (1.9% p.a. from 2000 to 2020), has not been able to match the country’s population growth (2.01% p.a.), resulting in a persistent deficit that necessitates imports.
Egypt, perennially the world’s top wheat importer, brought in approximately 12 million metric tonnes of wheat annually from 2017 to 2021. However, in 2022, Egypt’s total wheat imports declined by 18.7% to around 9.5 million tonnes due to surging prices and a foreign exchange crisis that left private mills and importers unable to pay for wheat shipments stranded at ports.
Wheat consumption is projected to increase by 2% to 20.5 million tonnes in the 2023/2024 market year, according to the USDA. To meet this demand, the Food and Agriculture Organization of the United Nations (FAO) anticipates that Egypt will import 12 million tons of wheat during the fiscal year 2023/2024, up from 11.6 million tons in 2022/2023.
The escalating demand is primarily attributed to population growth. Egypt’s population, currently at 104 million, is expected to reach 124 million by 2030, according to the Central Agency for Public Mobilization and Statistics (CAPMAS). Additionally, Egypt is home to approximately 10 million migrants from Iraq, Syria, Libya, Yemen, and Sudan.
Exploring Alternative Sources of Wheat
The conflict that erupted with Russia’s invasion of Ukraine on February 24, 2022, reverberated through the global grain industry, sending prices to unprecedented levels and intensifying market volatility. For Egypt, this conflict caused alarm, as Ukraine had consistently been the second-largest wheat exporter to Egypt after Russia, with the two countries collectively supplying 82% of Egypt’s wheat imports over the past five years.
As a result, the government is faced with the prospect of increased expenses as it continues to secure flour for subsidized bread, partially due to rising freight costs and escalating global wheat prices. According to projections from the World Bank, the cost of importing wheat for Egypt’s subsidized bread program may nearly double, soaring from an annual expenditure of US$3 billion to US$5.7 billion. For the 2022-2023 fiscal year, the government increased its budget allocation for bread and food subsidies by EGP 3 billion (US$97.09 million), reaching EGP 90 billion (US$2.91 billion), thereby putting additional strain on the nation’s budget. Despite its toll on national resources, Egyptian politicians often invoke the possibility of a bread riot to underscore why the provision of cheap bread is a “red line” that cannot be crossed as a matter of national security.
As ongoing conflicts threatening wheat supplies from the Baltic region, Egypt has been actively exploring new markets to source wheat. In the past year, Egypt has imported wheat from France, Romania, Bulgaria, and Germany, in addition to shipments from Russia and Ukraine. The country has also ventured into new sources, striking an agreement to import 500,000 tonnes of wheat from India.
Diversifying sources has already made an impact. Ukraine’s wheat exports to Egypt dropped to 9% from 21% a year earlier, enabling Romania to increase its exports to 13%. The government has also granted the General Authority for Supply Commodities (GASC) the authority to directly contract with any government or company for wheat purchases, bypassing the need for international tenders, as was customary in the past.
Public Sector Dominates the Milling Industry
Egypt presently boasts more than 410 public, public/private, and private sector mills, with total investments exceeding US$1.5 billion, according to the USDA. Public mills and public/private mills collectively produce 82% extraction flour, used for making subsidized baladi bread. Public mills account for 70% of the flour supplied to the Baladi bread subsidy program, while private mills contribute the remaining 30%.
However, private mills exclusively rely on imported wheat and do not purchase any wheat from the domestic market. They process this wheat into much finer 72% extraction flour for fino bread and cakes. Unless contracted by the government, private mills are prohibited from producing 82% flour to prevent black market trade.
Maize consumption driven by animal feed sector
In Egypt, maize is the predominant summer crop, covering a significant cultivated area with an average productivity of 7.78 tons/ha. While there has been some growth in planting yellow maize for animal feed, white maize remains the prevailing variety. In 2022, Egypt produced 7.4 million metric tons of corn, marking an increase compared to 2020 when 6.4 million metric tons were produced.
In February 2022, the government announced a guaranteed price of 9,000 EGP (292.2 USD) per metric ton of white corn and 9,500 EGP (308.4 USD) per metric ton of yellow corn to encourage farmers to expand corn cultivation, with some degree of success. The FAS Cairo forecasts corn production in MY 2023/24 (October – September) at 7.6 MMT, up by 2.1% from the MY 2022/23 estimate. This increase is attributed to a potential expansion of the planted area by 20,000 hectares as more farmers join the fray to benefit from high corn prices in the domestic market.
Despite the uptick in production, there is still a gap between maize production and consumption in Egypt, estimated at around 45%. Currently, the country’s demand for animal feed represents 85% of the total maize consumption, which exceeds 16 million tons annually. However, in the latest USDA report, corn consumption for MY 2022/23 was revised down by 20.6% from the MY 2021/22 estimate of 17 MMT, with the decrease attributed to a significant dip in feed and residual consumption. The USDA pointed to surging commodity prices globally as a likely cause for the decline. Over the past eight months, corn prices surged from 8,000 EGP/MT to 19,000 EGP/MT, while poultry feed prices climbed from 11,300 EGP/MT to 26,000 EGP/MT.
Egyptian rice is globally renowned for its high quality
Egypt stands as the largest rice producer in the Middle East and the primary rice market in North Africa. Rice is a staple in various cuisines in restaurants and households alike. For example, Koshari, the national dish and a beloved street food, prominently features rice, making it a vital commodity for Egyptians.
Egyptian rice is renowned for its high quality and commands premium prices on the global market. The growing demand for specialty rice varieties, especially long-grain rice, has fueled market growth. According to Mordor Intelligence, the Egypt Rice Market is estimated at US$1.82 billion in 2023 and is anticipated to reach US$2.54 billion by 2028, exhibiting a CAGR of 6.88% during the forecast period (2023-2028).
However, due to its significant consumption of limited water resources, the government discourages large-scale rice cultivation. The Ministry of Water Resources and Irrigation (MWRI) imposes restrictions on the use of land for rice cultivation in the Delta area provinces to mitigate seawater intrusion into the Delta lands and prevent soil salinization.
Recognizing the importance of rice in the national diet, Egypt actively supports the development of rice varieties that require less water to grow. Considerable progress has been made in this regard, with a new variety named “Sakha Super 300” earning a gold medal at the 2022 Geneva International Exhibition of Inventions for its ability to thrive in water-scarce conditions. Hopes are also high for a new partnership between the Egyptian and Chinese governments, which seeks to develop new varieties of drought-tolerant crops, particularly rice.
A Shining Example for Africa
Despite its status as one of the most water-scarce countries in the continent, Egypt has consistently led the way in agricultural production over the years. Its wheat production, standing at 9.3 MMT, is the highest on the continent. Furthermore, the nation is actively strategizing to increase production to 12 MMT by 2030. Innovation in areas like rice and maize, focusing on drought-tolerant varieties, is also gaining momentum. All these point to a nation on a mission to feed the millions within its borders. Its an open secret that despite what it does, Egypt, limited by finite water resources, may not fully meet demand. This is, however, not stopping it from making improvements in its quest to move closer to food security. That alone is admirable and should serve as a motivation for many other food-insecure countries, especially in sub-Saharan Africa, which possess significantly greater water resources and arable land.
This feature appeared in ISSUE 6 of MILLING MIDDLE EAST & AFRICA MAGAZINE. You can read this and the entire magazine HERE
