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Egypt Agribusiness Report Q1 2010
Business Monitor International, Nov 2009, Pages: 54
Business Monitor International's Egypt Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on Egypt's agribusiness service.
The Egypt Agribusiness Report Q1 2010 continues on the themes touched upon in previous publications and is the first to include the new Business Environment Rating. Rarely has the need for food selfsufficiency seemed more pertinent than at present. Higher than average food prices; recession-led lower disposable income; some of the lowest levels of water per capita in the world; and diminishing land resources all contribute in heaping further pressure on the domestic food supply.
The Egyptian government has concentrated efforts towards developing agricultural productivity, encouraging both investments in domestic production, as well as for private domestic companies to invest in overseas farmland. Locally based private equity firm Citadel Capital has stated its intentions to invest in East Africa, particularly Kenya and Uganda. According to the managing director, the publisher can expect to hear news of a major acquisition within the next year.
The selling of state-owned enterprises has provided a much needed boost to the interest of private entrepreneurs. In order to encourage a greater level of agricultural production, the government has made significant efforts to improve productivity. Foreign direct investment has flowed into agriculture in recent years, although it should be noted that a large proportion of such capital is leveraged through firms with interests in sectors, such as tourism, which have suffered markedly during the financial crisis. As such, it is unlikely that we will see the return of this type of investment, at least in the short term.
The agricultural ministry wants Egypt to be 75% self-sufficient in wheat within the next decade, raising the ratio from the current level of 55%. This would include increasing planted area by 29,400 hectares per year and also to increase the yield per hectare, which is by no means an easy task, given the propensity for drought, coupled with such meagre water supplies. Per capita consumption is currently estimated at 800 cubic metres, compared to the recognised poverty line of 1,000 cubic metres.
Egypt has one of the highest rates of wheat consumption in the world - 120 kg per capita annually - underlining the extent to which improving domestic production is vital to national well being. At present the government has to provide subsidised bread to the country's poor, which, at a time of global recession presents more of a drain than normal on state coffers. Due to limited potential to expand the Nile Delta, much of the increase in production will come from newly reclaimed land. the publisher sees such dynamics begin to take effect from 2010, with wheat production increasing throughout the outlook, although faster growth in consumption will mean that it becomes increasingly unlikely that the domestic gap will ever be plugged through domestic production alone and that overseas production is the only means by which this can be achieved.
The publisher expect to see moderate growth in most of the categories covered in the outlook in 2010 and, in the majority of cases, through the entire window to 2014. For most farmed products, however, this trajectory is not predicted to pick up sufficiently over the course of the outlook. Only beef and sugar are forecast to post double-digit production growth to 2014; of consumed goods, only milk, rice and beef are predicted double-digit growth.
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