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Egypt Agribusiness Report Q1 2012
Business Monitor International, Dec 2011, Pages: 83
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.
BMI View:
Because the political situation has not yet been completely settled, the Egyptian government is still very cautious about food price inflation. In fact, the interim government has taken several measures to boost the country's main crop production in order to increase supply on the domestic market.
For example, for grains the government introduced new seed varieties, boosting yields and thus output. For rice the government was reluctant to impose the normal area restrictions on water preservation and extended a ban on rice exports to ensure that the local market is well supplied. In line with this, BMI expects the livestock industry to recover on cheaper and more available feed stock. Finally, BMI created a cotton module, in which it illustrates the remaining political tensions resulting from volatility in global commodity prices.
Key Forecasts:
- Wheat production growth to 2015/16: 19.7% to 9.4mn tonnes. This growth will come thanks to government support and on the back of a larger area planted and higher yields owing to farmer intentions to improve production practices.
- Sugar consumption growth to 2016: 10.9% to 3.0mn tonnes. This will be due to growth in the local confectionary sector but also in the soft drinks sector, with the growing population and rising disposable incomes stimulating demand.
- Cotton production growth to 2015/16: 15.7% to 694,600 tonnes. This will come as higher prices have encouraged farmers to increase area planted and yields, which BMI expects to continue at least in the medium term.
- Real GDP Growth: 2.0% y-o-y in 2012 (up from 1.8% y-o-y in 2011)
- Consumer inflation: 8.3% y-o-y in 2012 (down from 10.3% y-o-y in 2011).
Industry Developments:
Grains officials in Egypt granted the first wheat import contract to Ukraine after three years of an effective ban. The Egyptian General Authority for Supply Commodities (Gasc) bought 120,000 tonnes of Ukrainian wheat at an average of US$248.6/tonne at the end of October. The country chose Ukrainian wheat over Russian wheat because of its significantly lower price. Egypt added Ukraine back to its list of potential suppliers in September as a result of an improvement in grain quality.
The Egyptian government announced on October 27 that it is extending a ban on rice exports in order to ensure that the domestic market is well supplied. The ban was introduced in 2008 and there is no clear sign yet of when it will be lifted. This is because the new interim government is wary of any move that might hurt domestic supply and prices, which could again feed public frustration after the recent revolution that toppled former president Mubarak.
Egyptian cotton exports are expected to be hampered by the current dispute between farmers and traders over the price at which the country's 2011/12 cotton should be sold, following a sharp fall in global cotton prices. Indeed, from August to end-October the country had exported only of 6,854 tonnes of cotton, compared to 110,000 tonnes over the same period in 2010/11. This is because farmers increased cotton plantings considerably for the 2011/12 season, as Egypt's agriculture ministry promised high export prices, while traders have significantly decreased their buying price on the back of lower global prices.
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