Wednesday,19 September, 2018
Current issue | Issue 1311, (8 - 21 September 2016)
Wednesday,19 September, 2018
Issue 1311, (8 - 21 September 2016)

Ahram Weekly

Not so sweet

The depreciation of the Egyptian pound coupled with rising global prices have created a sugar crisis in Egypt, reports Safiya Mounir

Al-Ahram Weekly

Sugar prices have witnessed sudden spikes over the past couple of weeks, with a kilogram going for as much as LE6 to LE8 even as the Ministry of Trade and Industry, in charge of the portfolio of the Supply Ministry since the latter’s minister resigned, has been trying to put more sugar on the market to limit the price increases while maintaining a price of LE5 per kilogram for the holders of subsidy cards.

While the state has announced it will make large quantities of sugar available in its own outlets, many people have not seen the extra supply, which has been bought up as soon as it hits the outlets.

Sugar is produced from cane in Egypt by several companies, including the state-owned Sugar and Subsidiary Industries, Alexandria Sugar, and the privately owned Nile Sugar. The Saudi Savola Group, which owns a factory in Ain Al-Sokhna, also imports sugar from abroad and refines it at its factory.

“The cause for the increased prices of sugar goes back to increasing global prices, which have reached $491 per ton compared to $300 per ton last year,” one sugar factory owner who requested anonymity said.

“The value of the dollar against the pound has also increased, which raises costs for importers and leads them to reduce their imports.”

The factory owner said that the LE5 per kilogram price set by the state for sugar at its own outlets and for subsidy card holders was not commensurate with the cost shouldered by importers.

According to a report from the Ministry of Agriculture, this year Egypt produced about 2.2 million tons of cane and beet sugar, of which cane represents 57 per cent and the rest is accounted for by beet.

Local consumption of sugar is about 3.1 million tons annually, meaning there is a gap of about 900,000 tons to be made up for.

Companies making beet sugar are located in the Delta, Noubariya, Fayoum, and Daqahliya. The gap has been filled thus far by companies importing raw sugar and then refining it in their own factories, including Nouran, Al-Bayan, and Cargill.

The factory owner said that the Saudi-owned Savola Group had imported raw sugar and refined about 400 tons of it in its factories to fill the consumption gap, but it had now been forced to export its products to provide the hard currency it needed for imports, making the shortages worse.

The source said that a ton of imported sugar cost $491 or about LE4,500 at the official exchange rate. Refining and transport increased the cost to about LE6,500 a ton, he said, adding that to make a profit the market price needed to be at least LE7 per kilogram.

The government has announced several steps to bring the market under control, with Ahmed Al-Wakil, head of the Federation of Chambers of Commerce, saying on 29 August that the Holding Company for Food Industries, subordinate to the Ministry of Supply, had contracted to buy 500,000-600,000 tons of sugar.

In a meeting of the Cairo Chamber of Commerce, Al-Wakil said there was no problem supplying sugar to the local market and that the state had reserves that would last for four months.

The same day Tarek Kabil, the minister of trade and industry, said the Supply Ministry would pump 37,000 additional tons of sugar into the local market to meet consumer needs.

He added that the ministry was seeking to supply 450,000-550,000 tons of sugar to meet the needs of the local market through the end of the current season in February.

The market source said the state needed to stop providing in-kind subsidies if it wanted to solve the problem, because “two different market prices lead to theft.”

He said that subsidised sugar went to people who did not need the subsidies, including those on high incomes and the owners of confectionary factories who can cut production costs by obtaining the cheaper sugar provided by the ministry of supply.

The source criticised what he called the “extravagant subsidies” the state gave to farmers and at other times to consumers.

The Ministry of Supply raised the price of cane sugar to LE400 at the end of the agricultural season and bore LE100 of the price on behalf of Sugar and Subsidiary Industries, which reduced production costs by LE1,000 per ton, increasing the company’s competitiveness and its profits.

The state-owned Sugar and Subsidiary Industries produces about 1.1 million tons of sugar annually that is directed to subsidised sugar supplies.

The writer is a freelance journalist.

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