Using what we have
With intelligent intervention, Egypt's agricultural production could be raised and resources saved, minimising the impact of the world food crisis, writes Hamdy El-Swalhy
The food issue and the need to meet Egypt's demand for food has always been a top priority for policymakers when setting economic policy objectives. Since the world food crisis of 1974, the Egyptian government has adopted several policies to satisfy the country's food needs, including policies geared to increasing domestic production, import policies, subsidy policies to provide food items at reduced prices -- especially for the poor -- and policies that aim at improving individuals' incomes.
Due to such policies, sufficient food items have generally been available in the Egyptian market. However, this has been achieved through a heavy dependence on food imports, which in turn has resulted in high import costs incurred by the Egyptian economy, a high exposure to fluctuations in world market conditions and, of course, in continuous increases in the cost of food subsidies in the state budget.
Egypt is classified as a net food importer as it imports significant amounts of most basic food items while its exports of some food commodities are modest. Egypt is also the second largest importer of wheat worldwide and the fifth and the fourth largest worldwide importer of maize and vegetable oils respectively. Fluctuations in world food prices are quickly reflected in the costs of Egypt's food products.
Egypt's food gap
Before addressing the adverse impact of the skyrocketing increase in world food prices on the national economy, it is worthwhile to take a closer look at the food gap in Egypt. Wheat, maize, rice, broad beans, lentils, vegetable oils, sugar, meat, milk, vegetables, fruits and pulses are the major food products consumed in Egypt. There is a shortage in the production of all these products, except for rice and some fruits and vegetables whose production surplus is exported.
Clearly, the core of Egypt's food problem lies in the shortage in domestic production of major food commodities. The gap between domestic production and consumption has been estimated at an average of 44 per cent for wheat, 35 per cent for maize, 78 per cent for vegetable oils, 96 per cent for lentils, 45 per cent for broad beans, 20 per cent for sugar, 17 per cent for red meat and 19 per cent for milk. This gap has been continuously widening over recent years and consequently dependence on food imports has been increasing. The value of food imports amounted to about $3.5 billion annually over the period 2003-2006. In 2007, however, there was a significant surge in the value of food imports, which went up by 78 per cent compared to the 2006 level (71.6 per cent of such increase was due to the increase in import prices while seven per cent is attributable to the rise in the volume of imports).
Several factors are behind the increase in national food consumption: continuous population increase at a rate of two per cent per annum; the improvement in average income levels that raised demand for food commodities; and the dampened domestic prices of such commodities resulting from subsidy policies. On the other hand, the modest rate of growth in agricultural production is brought about by the high costs of production of various crops that rose at rates exceeding those of agricultural prices, especially after the implementation of economic reform policy during 1986- 2006.
The impact of world prices
With the implementation of economic reform policies and the liberalisation of world trade, domestic prices have become more closely associated with world prices. The correlation coefficient for all food commodities has exceeded 92 per cent.
Due to deficiencies in the domestic market and prevailing monopolies in the food commodities market, domestic prices have increased at rates exceeding those of world prices. Analyzing the relationship between both world and domestic prices of major food commodities over the period from March 2006 to March 2008 reveals that an increase of one per cent in world prices is reflected in an increase of more than one per cent in domestic prices for all food commodities.
The increase in prices of imported food commodities in the domestic market has led to the rise of domestic food commodities, such as rice, vegetables and fruits, eggs and milk, at rates closer to those of imported food commodities. The highest rates of increase have been observed for wheat (124.2 per cent) and maize (113 per cent) while red meat has witnessed the lowest increase rates (24.7 per cent). The exception to the rise has been sugar whose price has dropped by 21.4 per cent during the said period due to the increase of world production of sugar, especially in Brazil and India.
Price rises and cropping patterns
Just as the increasing prices of global food have influenced domestic consumer and farm prices, they have also brought about significant changes in the cropping pattern in Egypt in the 2007-2008 seasons. These changes are manifested in the following patterns:
Wheat area increased by 14 per cent compared to 2006.
Maize area increased by 11 per cent compared to 2006.
Cotton area declined by 52 per cent as a consequence of the shift towards cultivating wheat in the winter season and maize in the summer season.
Rice area remained at its current size of 1.6 million feddans (one feddan equals just over one acre) because the return per feddan is still higher than that of the competing summer crops.
Soya beans area increased by 20 per cent.
Vegetables, fruits and sugar cane areas remained at their current size.
Suggested new agricultural policies
Addressing the world food crisis requires instituting changes in agricultural objectives and programmes with the aim of raising the efficiency of land and water utilisation in order to increase agricultural production and to minimise the food gap and dependence on food imports. Priority has to be given to raising the self-sufficiency ratio for major food crops which, together with increasing the production of export crops, must be set forth as the main objective of any agricultural policy. This objective can be fulfilled through expansion of the cultivated area, as well as boosting feddan productivity. Quantitative targets need to be set along with identifying the means of achieving the said objective.
Several interventions must be made if we are to address the food gap and weather the world food crisis. First, the irrigation system must be upgraded. In Egypt, water resources available for agriculture are limited. This constitutes a major challenge for the expansion of the overall cultivated area. Adding to this fact, the use of flood irrigation as well as the traditional tendency to grow water- intensive plants is exhausting the share of agricultural water resources. For example, one feddan of bananas needs about 12,000 cubic metres of water annually, while grapes need about 9,000 cubic metres per feddan. These quantities could irrigate two feddans of wheat and maize annually.
Agricultural and water policies should focus on programmes that secure sufficient quantities of water to allow the expansion of cultivated areas of major crops in order to ensure food security in Egypt. This requires drawing plans to replace flood irrigation systems by drip irrigation systems, which could save up to 3.124 billion cubic metres of water. Another valuable intervention would be launching intensive awareness campaigns to inform farmers of alternative systems and their benefits. Such behavioural changes could result in saving 1.4 billion cubic metres of water annually. A third measure could be implementing a programme for applying modern irrigation systems in all current and future new area lands, such as drip or sprinkle irrigation systems. Under such a programme an estimated 1.16 billion cubic metres annually could be saved.
Second, rice production and cultivation should be rationalised. Due to the high net return per feddan of rice (LE2530) compared to that of the competing summer crops such as maize (LE1888) and cotton (LE1015), farmers have increased such cultivated area to 1.6 million feddans annually. The current law limits rice cultivation in Egypt to 1.1 million feddans. This law needs to be adjusted to raise the limit to 1.2 million feddans to meet food security and export needs, and must be strictly enforced by the government. In addition, farmers need to be supported by the provision of some agricultural services such laser levelling and high quality seeds. Once implemented, water saved under this programme could be about 1.2 billion cubic metres annually.
Third, a ban on building on agricultural land should be enforced. An estimated loss of 39,000 feddans of fertile lands per year has been attributed to illegal building on agricultural lands. Egyptian agriculture lost about one million feddans of fertile land during the period 1981- 2007. The expected outcome of legal intervention is the conservation of fertile land and its use in growing wheat in the winter season and maize in the summer. This could yield 105,000 tons of wheat and 125,000 tons of maize annually.
Fourth, high yielding and disease resistant seeds should be universally used in the growing of all crops, especially cereals, pulses and vegetable oils. At an estimated cost of LE60 million to the government, an expected increase in annual production due to such intervention is 600,000 tons of wheat, 300,000 tons of maize, 220,000 tons of rice, 60,000 tons of broad beans and 3000 tons of soya beans.
Research and reform
Positive intervention needs to intensify, including:
1. Improving Barseem productivity. Barseem is the major competing crop to wheat as they are planted over the same area during the winter season. The cultivated area of long- season barseem amounts to 1.82 million feddans annually. Improvement of barseem productivity per feddan can bring about an increase of 36-40 tons in crop yield. Raising productivity can yield the same amount of production from a smaller area and the area saved can be used for expanding wheat cultivation. In this case, production of wheat can increase by 810,000 tons.
2. Implementing the results of agricultural research. Such research has produced significant results that, if taken into consideration, can contribute to increasing productivity per feddan for all crops, especially major ones, by 25-35 per cent. Packages of technical and practical recommendations exist to reach this target. The careful application of such recommendations can help increase productivity per feddan by 40 per cent for maize, by 30 per cent for wheat, and by 26 per cent for rice.
3. Expansion of the use of biotechnology. Biotechnology has introduced tremendous developments in food production worldwide through the creation of new crop varieties and breeds. Application of biotechnology in Egypt would help produce short-season and early ripe varieties that increase production and save water. In this context, agricultural policy should give attention to biotechnology research, especially for the production of cereals, pulses and fruits.
Agricultural policies must also be directed towards achieving an increase in the production of export crops as a second objective and priority. These crops include rice, vegetables, fruits, and medical and aromatic plants, in addition to enhancing and improving the quality of exported commodities. More generally, investment in the agriculture sector must be increased from the low level of seven per cent of total national investment. Further, agricultural research remains effectively insignificant as wages and salaries devour 93 per cent of the budget allocated to this activity.
Finally, there is a need to look deeper into how to forge and operate a more sound agricultural system that could function efficiently and effectively. It should be backed by a cooperative bank that is financed through members' funds, banks working in the field of agricultural development, and World Bank loans.