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Egypt Agribusiness Report Q3 2010
Business Monitor International, May 2010, Pages: 59
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.
Authors View: In order to secure its long-term food security, Egypt has been increasingly looking abroad, thereby joining the worldwide trend of import dependant countries investing in farmland in foreign countries. We expect rice production to record a slight decline over our forecast period, as the government attempts to reduce the immense pressure on its limited water supplies. Rice is a very water intensive crop to produce and Egypt is considered a water-poor country. As production is being cut domestically, Egypt must increasingly look abroad to meet its rice demand. To this end, in April 2010, a unit of Egyptian private equity firm Citadel Capital signed a 30-year lease agreement for land in Sudan to build the country's first large-scale commercial rice farm. This move is part of a broader trend and more investments of this nature can be expected in coming years.
Key Views
- Multinational firms have begun to target Egypt's sugar refining industry. Most recently, in February 2010 US agricultural giant Cargill requested permission to construct a EGP600mn (US$109.71mn) sugar refinery following in the footsteps of Saudi Arabia's Savola Group.
- Egyptian consumer demand for processed and packaged meat continues to strengthen considerably as tastes and preferences develop and investment into processed channels gathers momentum, with beef consumption forecast to increase by 17.1% to 2014.
- The Egyptian government has been pursuing a policy of expanding agricultural production in an effort to decrease import dependency. We expect wheat production in the country to rise by 13.5% to 2014.
- Urban sprawl and limited water availability are both contributing to the loss of the little agricultural land there is in Egypt, with climate change also contributing to desertification.
- Looking at the 2008/09 numbers, the Egyptian economy is clearly one of the most resilient in the region; we forecast real private consumption growth of 4.0% in 2010.
Key Outlooks
- Egyptians are some of the highest per capita consumers of wheat in the world, consuming an array of breads, as well as pasta, as dietary staples. Given the generally low incomes and low per capita spending on food, cereals such as wheat, corn, sorghum and rice make up the bulk of the Egyptian diet, providing over 72% of daily energy and protein supplies, with the government subsidising wheat prices. Both demand and production output are expected to recover in 2010, on the back of an economic recovery.
- Egypt's dairy industry is underdeveloped, with small-scale producers dominating the sector. Many dairy farmers produce mainly for their own consumption, with any surplus production sold to extended family members and the local community. However, a number of larger-scale farms are slowly starting to appear and we expect that investment in the dairy sector and improving production will pick up in coming years, driven by strong demand on the back of rising incomes. We are expecting an increase in fluid milk production of 9.3% to 2014.
- Unpasteurised milk still dominates the largely traditional dairy sector, with most consumers receiving milk delivered straight to the home in glass bottles. It is estimated that around 75% of Egyptians consume milk that has not been packaged or pasteurised. However, this figure is dropping rapidly as health and hygiene concerns, as well as rising incomes see more consumers convert to higher-value packaged milk products. Bearing in mind these changing consumption patterns, we are forecasting that fluid milk consumption will rise by a robust 19.5% over our forecast period.
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