Egypt is suffering from an acute food deficit, estimated at around 60 per cent of its strategic food needs. It is barely self-sufficient in fruit, vegetables, potatoes and eggs, and it has to import 70 per cent of its needs in wheat and fava beans, 32 per cent of its sugar needs, all its food oil, lentils and yellow corn feed needs, and 60 per cent of its needs of red meat, butter and powdered milk.
Egypt has topped the list of the world’s major wheat importers since 2005. This year it imported 12 million tons of wheat. It is the fourth largest yellow corn feed importer, at eight million tons annually, and the seventh largest food oil importer, at the rate of three million tons per year.
A large portion of this food gap is connected with Egypt’s shortage of water resources and the agricultural land needed to expand food production. With only 62 billion m3 per year of fresh water resources, Egypt is classified among the countries suffering from “water scarcity”. The per capita share of these resources has fallen below the minimal level of water needs, estimated at 1,000 m3 per year, to 680 m3. Due to this paucity of water, hopes are now pinned on vertical development, or increasing the production of units of cultivable land and increasing the returns from such units by intensifying the search for new subterranean water resources for irrigation purposes.
Egypt’s water resources are currently limited primarily to the 55.5 billion m3 of water that it has received from the Nile for hundreds of years and around which Egyptians have long arranged their lives, even after the population topped 91 million this year. Egypt’s population stood at 23 million in 1959 when the quota of Nile water was set with the other Nile Basin countries in the Nile Waters Agreement.
The country’s other water resources are 5.5 billion m3 of subterranean water and 1.3 billion m3 of rainwater in the Delta. The rest of the rainwater falls primarily in uninhabited and uncultivated desert areas, mostly in the coastal areas extending westward from Alexandria to the Libyan border and eastward across the Sinai to the border with Gaza and Israel. There are also seasonal flash floods in the wadis of the Red Sea governorates and in some of the Upper Egyptian governorates in areas next to the mountains in the Eastern Desert.
Thus far, the damage from these floods has been greater than their benefits. But if suitably tamed through expansion in the construction of rain traps, artificial lakes, dikes and other things, the dangers would be significantly reduced and large quantities of water could be stored and used for agricultural development as well as for residential and industrial uses.
Under the recently passed investment law, investors in the agricultural sector who cultivate or “grow and process” the strategic foodstuffs that are currently imported in large quantities will be exempted from taxes for five years and entitled to a 50 per cent tax exemption thereafter. The purpose is to stimulate the cultivation of food oil plants (such as sunflowers), soya beans, corn feed, lentils, fava beans, beetroot, sugarcane and wheat and/or expansion in the construction of livestock feedlots.
More generally, lawmakers hope to encourage investment in the agricultural sector, normally not as attractive to investors as other sectors. Profits in the agricultural sector range between 10 and 20 per cent of the investment capital per year. A cubic metre of water yields a return of only LE10 in the agricultural sector, compared to LE50 in the industrial sector and LE500 in the tourist and hotel industry. In addition, employees in the industrial and commercial sectors earn from five to 15 times as much as their peers in the agricultural sector.
A major reason for the low profitability of Egypt’s agricultural sector is the international commitment to the UN principle of the right to food, in accordance with which countries try to keep food prices low and within reach of the wallets of poor and limited-income sectors of society so as to ward off social unrest and instability. Specialists in this field warn of the risks of what they term “hidden hunger” or “the new face of hunger,” by which they mean the phenomenon of supermarket shelves brimming with food but at prices that are beyond the capacities of the poor or even broader sectors of consumers, effectively rendering those things unavailable.
In addition to the provisions of the new investment law, Egypt’s constitution also contains a provision that obliges the government to buy strategic food crops from farmers at the posted prices on the international food and grain stock markets, on top of which it must add a percentage for profit in order to increase the incomes of farmers and encourage them to cultivate the types of food that are currently being imported.
The government’s recent economic decisions, especially the decision to float the Egyptian pound, should give a boost to the agricultural sector and offer unprecedented incentives to Egyptian and foreign farmers and investors to increase their cultivation of strategic crops. Now that the price of importing their equivalents in dollars has nearly doubled in terms of the Egyptian pound, growing and processing these crops domestically will be far more profitable than before.
COST SAVINGS: For example, it costs about $250 to import a ton of wheat up to the point when it reaches the Egyptian ports. At the old rate (about LE9 to the dollar), this came to LE2,250. Now that the dollar rate for important credits has risen to about LE16, it comes to LE4,000, or LE600 per ardeb (150 kg), up from around LE340.
Previously, the government purchased an ardeb of wheat from farmers at only LE420, which included the above-mentioned incentive increment to encourage them to plant wheat. Now the situation is reversed. The government will purchase an ardeb of wheat from farmers for around LE600, not including the extra subsidy from the state. This promises to put an end to the phenomenon whereby foreign wheat imports were adulterated by mixing in quantities of cheaper domestically produced wheat, since the latter will now be more expensive than its foreign counterpart as a result of the recent decisions.
More importantly, Egyptian farmers will also now have a greater incentive to plant wheat since they stand to gain LE15,000 per acre of land under wheat cultivation as opposed to LE8,000 before the rise in the exchange rate. This in turn could help generate a balance between wheat cultivation and its rivals among winter crops, among them clover, the main fodder crop in Egypt, which has always yielded higher returns than wheat and which farmers traditionally rely on for their livestock.
Farmers have long had a strong preference for cultivating clover, which is said to increase the milk yield of cows and water buffalos and accelerate the fattening of cattle. However, the higher prices of imported wheat and the greater profitability of growing it at home are likely to temper that preference and inspire the farmers towards a shift to wheat production.
The recent economic measures will also give farmers an incentive to revive the cultivation of some strategic food commodities that they had stopped producing because they were unprofitable. One example is lentils, which only yielded a return of LE6,000 per acre and about a ton of the Egyptian variety of lentils. As a result, the country currently imports 100 per cent of its lentils. However, now that the price of imported lentils has soared to LE28 per kg or LE 20,000 per ton, farmers may be induced to reintroduce the highly-esteemed “esnawi” strain of lentils which they can now sell for at least LE22,000 per ton – an excellent return from any crop.
Fava beans are another example of a crop that Egypt’s farmers have turned away from due to their lack of profitability, as a result of which Egypt now imports more than 70 per cent of the fava beans it consumes. However, whereas in the past farmers could only sell an acre’s worth of these beans (about 1.2 tons) for LE7,000, the new currency exchange rates and the rising cost of imported beans offer farmers the prospect of earning over LE20,000 for that quantity.
This gives them a powerful reason to get back into fava bean cultivation, which, together with the revival of lentil production, will enable the state to save the billions of pounds a year it spends on importing these pulses. It will simultaneously support the Egyptian economy through the billions of pounds that are generated through domestic production.
The same effect will be seen, perhaps even more powerfully, with the cultivation of oil seed plants, such as sunflowers, soya beans, and high-quality cotton seeds. Egypt currently imports all its needs of food oils due to their low profitability, and the 16 factories that produce food oils in Egypt prefer to import the raw materials from abroad and refine and package them locally.
However, a litre of sunflower or soya bean oil costs around LE30 in the Egyptian market today, which means that cultivating the seeds domestically would increase farmers’ returns to LE20,000 per acre under cultivation of these crops. In addition, the country would save some $3 billion a year it spends on importing some three million tons of food oils at an average of $1,000 per ton. The cultivation of these vegetable oil plants domestically would also generate a compound value for the economy and the Egyptian pound through the dollars saved and the profits generated at home.
In like manner, the Egyptian treasury has to come up with the $1.7 billion a year it costs to import about eight million tons of yellow corn feed. Yet, it is very easy to cultivate this domestically since there are no other economically viable plants to compete with it in the summer season. Moreover, only about 190,000 acres are under cotton cultivation in Egypt, and fewer than two million acres are under rice cultivation. Farmers have no other major economically viable crops to plant in the remaining six million acres that are allocated for crop cultivation.
Of the 8.6 million acres of available agricultural land in Egypt, 2.5 million are allocated for perennial plants such as sugarcane and orchard fruits and the vegetables that enter the kitchens of 91 million Egyptians every day. The rest of the agricultural land, after deducting the area under cotton and rice cultivation, comes to about four million acres in the summer season. To divide this between yellow corn for animal feed and oil seed cultivation would enable Egypt to become totally self-sufficient in these strategic commodities and simultaneously spare it the need of having to arrange for $5 billion to import them. It would also generate double the value for the economy from producing the same $5 billion worth of these items on Egyptian land at a time when it is not in use for other crops.
Sugar prices have been rising steadily in the international commodity markets since February. A ton of sugar now costs $600, or about LE10 per kg, at the current exchange rate. Therefore, the rate of self-sufficiency in sugar production, which has remained fixed at 68 per cent for 10 years, needs to be pushed upwards. In order to do this, some 350,000 acres need to be put aside for sugar beet cultivation, which does not consume much water, or about 160,000 acres currently under sugarcane cultivation. The disadvantage of sugarcane is that it consumes 500 m3 more water than sugar beet for every ton of sugar produced. Its advantage is that an acre of sugarcane produces 2.3 times the amount of sugar of an acre of sugar beet, meaning that a much smaller area is needed to produce cane sugar.
Moreover, Egypt has many plants that manufacture products derived from cane sugar, such as ethanol, molasses and acetone. Cane sugar refineries also use the sugarcane and molasses produced as fuel for their operations, thereby greatly reducing the consumption of natural gas. Plus, the black pulp that is a by-product of the process can be used as a kind of fertiliser that is very popular among Egyptian farmers.
The government has already raised the price it pays farmers for a ton of sugarcane from LE400 last season to LE500 this. In view of the rise in sugar prices on the Egyptian and international markets, Egypt’s sugar farmers stand to earn LE4,500 more per acre than last year. The government has also increased the price it pays for sugar beet from LE400 to LE450 per ton, meaning that farmers will earn LE2,500 more per acre than last year.
PRICE RISES: The recently introduced economic measures will trigger price rises in imported meat, whether from Sudan or the EU, and they have already caused the prices of Egyptian-produced meat to increase by 25 per cent.
This should encourage livestock fattening projects in Egypt. It should also prevent the slaughtering of very young calves when they weigh only 80 kg (so as to produce veal), which is a scandalous waste of animal wealth. Putting these calves in fattening programmes that would bring their weight up to 400 kg within fewer than three years would greatly reduce food deficiencies in meat. Egypt currently imports 60 per cent of its meat needs. In addition to helping save hard currency reserves, this would also open up job opportunities in the livestock sector.
In the light of the above, it can be confidently predicted that the Egyptian agricultural sector will be one of those benefitting most from the recent economic decisions, and especially from the floating of the pound leading to a higher exchange rate for the dollar. The measures will help stimulate an Egyptian agricultural revival. Egypt’s farmers will reintroduce crops they had stopped cultivating due to poor economic returns. And the new exchange rate will give a powerful boost to Egyptian fruit and vegetable exports to other countries in the Arab world and to EU countries, Russia, Ukraine and Japan. This in turn will encourage further investigation of the potential of organic foods free of fertiliser and insecticide residues and better for public health.
Europe currently imports much of its organic food from Tunisia, Ethiopia, Tanzania and Uganda. Egypt, by virtue of its position on the Mediterranean Sea, is closer to Europe than the latter three countries, which would help make Egyptian organic food exports more competitive. The country would acquire an additional competitive edge if organic foods were cultivated in virgin land produced by the “Million-and-a-Half Feddans” land reclamation project, as the soil would be totally uncontaminated and the crops would be nourished on pure water from deep subterranean aquifers in the desert remote from any urban areas and any possible wastewater seepage.
The resulting produce would thus be 100 per cent organic (organic products come in grades, such as 80 or 50 per cent organic). If the cultivation of potatoes, one of Egypt’s most famous export crops, could also be relocated to the newly reclaimed land, this would overcome the problem of brown rot and enable Egypt to regain its position as the foremost potato exporter to the Arab world, Russia and Ukraine. We can look forward to a period in which Egyptian vegetables will return with vigour to European markets after the long hiatus since July 2010.
The writer is a professor of soil and water sciences at Cairo University’s Faculty of Agriculture.