Subsidising agriculture directly and indirectly is one of the cardinal principles of the UN Food and Agricultural Organisation (FAO) and is applied by countries around the world. The US government subsidised American farmers to the tune of $100 billion in 2010. The EU continues to maintain high ratios of subsidies for agricultural, livestock and dairy farming.
In this regard, one cannot help but recall the pitiful exploit on the part of the Egyptian government in 2010 when it dispatched Rashid Mohamed Rashid, the then minister of trade and industry, to the World Trade Organisation (WTO) conference to try to persuade the US and the EU countries to lift their farm subsidies in order to give Egyptian agricultural exports a better chance to compete in their markets.
Rashid was given a stern lesson in the need to respect other countries’ rights to support their farmers. They told him that in order for Egyptian goods to compete more effectively in international markets, the Egyptian government should trim production costs and then subsidise Egyptian farmers instead of pursuing the strange policy of effectively subsidising wealthy Egyptian exporters.
The US and EU representatives at the WTO conference also advised the minister to study the experiences of Tunisia, Tanzania, Ethiopia, Uganda, Brazil, Argentina, Uruguay, Paraguay and other Third World countries that had managed to reduce costs, support farmers and eventually dominate the food export trade to the EU and US, to the exclusion of Egypt.
The FAO believes that poor and developing countries that depend heavily on food imports are the countries that most need to support their farmers by subsiding agricultural production. The UN agency’s maxim here is that support for farmers also supports the government and the state. For example, by subsidising chemical fertilisers, governments can encourage farmers to purchase them at reduced prices and use them to increase yields.
This benefits the state by reducing the need to import strategic goods, sparing the treasury the burden of having to come up with the required dollars for these imports. The FAO argues further that if chemical fertilisers are too expensive, forcing farmers to halve the quantities they use in order to cultivate wheat, for example, this reduces the yield by 30 per cent of what they would have obtained if they had used the entire recommended amount. To compensate, the developing country in question has to import the equivalent amount in order to meet domestic needs.
In the event that chemical fertilisers become so expensive that farmers stop purchasing them altogether, yields of crops such as wheat, barley, fava beans, lentils, chickpeas, corn, sugar cane and sugar beet will be reduced by 50 per cent, compelling the state to import the equivalent amounts of these crops and further straining the treasury by gnawing away at foreign currency reserves.
Should a government not have the sufficient reserves, it could be forced to resort to the black market which would drive up currency exchange rates at the expense of the national currency and economy due to the decline in agricultural production and its shrinking share in GDP.
The same argument applies to the need to subsidise high-yield seed. For example, our government purchased wheat from farmers at LE420 an irdab (approximately 150 kilograms) last year but sold them seed for LE1,000. As a result, the farmers naturally opted to use stored seed from earlier harvests instead of the certified high-quality seed. Their yields then declined by 25 per cent.
The government should also subsidise certified, non-toxic and unadulterated insecticides that would enable farmers to increase production by 30 per cent and avert the losses due to blights because they are unable to afford insecticides. Yet, unfortunately our government does precisely the opposite. Instead of subsidising the products farmers need to increase yields, it raises the prices of everything on the grounds of the present economic straits.
At the same time, it has increased the subsidies for wealthy exporters from two to four and then to six billion LE this year. If this money had been invested in subsidising farmers instead, Egypt’s agricultural production would have doubled. But sadly we persist in going round and round in a cycle of policies dictated by the demands of traders.
Price hikes: The most recent development in this regard was the government’s decision to hike the price of chemical fertilisers by 50 per cent from LE2,000 to LE3,000 per ton or from LE100 to LE150 per bag.
Yet, all fertilisers in Egypt are locally produced and entirely from local materials. So it is unclear why the prices were jacked up unless the idea was to threaten to export these products rather than to sell them locally.
The fertiliser manufacturers are also Egyptian companies whose licenses stipulate that they must sell their products in the domestic market first and that only the government has the right to export them. Accordingly, the government should apply the same step it took with respect to rice, which is to ban the export of the fertilisers instead of allowing the companies to increase their profits at the expense of poor farmers.
It is not as if Egyptian farmers had suddenly experienced some windfall that enabled them to afford a price rise from LE600 to LE900 for the amount of chemical fertiliser they need per acre. No wonder farmers are abandoning agriculture and squandering precious agricultural land by selling it to construction contractors or building on it themselves.
A farmer can rent out a 90 m2 flat in a small apartment block on a corner of his property for LE350 a month or LE4,200 a year, while providing a comfortable home for his family on the first two floors. Could he earn as much a year from an acre of cultivated land? Does it make more sense to him to plant a cement block on half an acre or to plant that land with food crops and wear himself out hunting for fertiliser on the black market, renting a tractor to pull his ploughs, and hiring labour to help him do the harvesting, only for merchants to then suck him dry and for the government to show its disdain for farming and farmers by compelling them to shoulder more than they can bear?
Yet, Article 29 of the 2014 Egyptian Constitution states that agriculture is a basic component of the national economy. The state is committed to protecting and increasing the land under cultivation and preventing encroachments on it. It is supposed to work to develop the countryside, raise the standard of living of its inhabitants, and protect it from agricultural risks. It should develop agricultural and livestock production and encourage industries based on it.
The state is committed to providing the requirements of agricultural and livestock production and buying basic agricultural crops at appropriate prices to achieve a profit margin for farmers in agreement with agricultural unions, syndicates and associations. The state is also committed to allocating a percentage of any reclaimed land to small farmers and young graduates and to protecting farmers and agricultural workers against exploitation.
However, it only takes a quick look at this article, which the government is legally bound to implement or risk dissolution by parliament on the grounds of violating the constitution, to realise that the government has not implemented a single one of its obligations. It has done nothing to encourage Egyptian agriculture and develop agricultural and livestock production. It has not provided the requirements for agricultural production, leaving this to the private sector instead, which has been left unregulated and free to prey on farmers as it pleases.
One ton of seed potatoes, for example, once imported by the Egyptian Agricultural Organisation and sold to farmers for only LE500 in 2005, has now soared to LE5,000 since it was abandoned to private-sector merchants who purchase the cheapest seed potatoes from abroad in order to reap the highest profits at home, as opposed to the highest productivity.
Nor has the government purchased “basic agricultural crops at appropriate prices to achieve a profit margin for farmers.” Instead, it robs farmers or turns them into the subsidisers of the state. It costs the government $250 or LE4,500 (at LE18 per dollar) to import a ton of wheat, which comes to LE675 per irdab. One would have expected the government at least to subsidise Egyptian farmers by purchasing their wheat for the same amount, though it would be preferable to encourage them to plant more by purchasing it for LE700 per irdab.
However, our trader-friendly, pro-import and anti-self-sufficiency government does not offer LE675 per ton of wheat, let alone LE700. Instead, it has set the price for an irdab of domestically grown wheat at LE500 because its real policy is to subsidise Russian, Ukrainian, Romanian, American, Australian, Argentinian and Canadian wheat growers by purchasing it from them at LE700 per irdab when the Egyptian farmer apparently only deserves LE500 and is expected to be grateful for this because last year he received LE420.
At the time this policy was decided the dollar was equal to about LE9 as opposed to the current LE18, but the price of Egyptian wheat did not double like the price of foreign wheat as a result of the exchange-rate changes, meaning that Egyptian wheat remains cheap and still open to plunder. If we had a parliament that was truly independent and genuinely felt for our fellow citizens in the impoverished countryside, it would withdraw its confidence from the government and put it on trial for its flagrant breach of the constitution.
Other crops: The same situation obtains with cane sugar and sugar beet. As the prices of these have quadrupled since last year, one would have expected the government to set the prices for purchasing sugar from local farmers at double last year’s at least.
However, the government has only offered a 25 per cent increase, prompting sugar beet and sugarcane farmers to threaten to turn to banana cultivation. Banana plantations earn four times as much as sugarcane fields. While Aswan is home to the most famous banana growing area in Egypt, its cultivation has begun to spread to traditionally sugarcane areas in Luxor, Qena and Minya, since the government feels that it is more important to subsidise Brazilian, Indian, Thai and German sugar exporters than to support Egyptian sugarcane and sugar beet farmers.
The price of sugar in the international markets currently stands at $650 a ton, or about LE12,000, including transport and freighting fees. This comes to LE12 per kg, meaning that by the time it reaches supermarket shelves in Egypt it sells for LE18 per kg, if consumers can find it at all. A ton of sugarcane yields about 110 kg of white sugar, which currently sells for LE1,980. If this quantity were to be sold in the market at LE15 per kg, the original ton of sugarcane would earn some LE1,650.
Yet, our just and clever government, forever vigilant about the rights of Egyptian farmers, paid them only LE500 per ton of sugar this year. After which it extracted sugar worth to the tune of between LE1,650 and LE1,980, not to mention the 28 other products derived from sugarcane or the refining process, such as spirit alcohol (for hospitals, pharmaceutical companies and perfume manufactures), vinegar, molasses, cane products, and organic fertilisers.
One would have thought that the government would have paid LE800 to LE1,000 per ton of sugar cane, giving farmers a chance to breathe and earn a decent living and earning for itself some genuine and well-deserved gratitude from farmers for a change.
The prices of basic foodstuffs such as lentils, pulses and food oils have all soared, and they will skyrocket due to the recent floatation of the pound. The same applies to yellow corn feed which is used to feed poultry and livestock and of which Egypt imported eight million tons this year, up from 5.5 million three years ago (which reflects the ongoing deterioration of the country’s agriculture).
The government failed to factor in these rising prices or did not accord them sufficient weight in its calculations. As a result, for the poor and limited-income segments of the population merely stocking the home with basic necessities has become a luxury. Were it not for the fact that Egyptian farmers have kept down the prices of tomatoes and other winter vegetables such as peas, green beans, courgettes, spinach and potatoes, the government would be facing a tidal wave of anger from the poor.
We can only be grateful that onions have only risen to about LE7 to LE8 per kg. If tomatoes had followed suit the government would have found itself in a dire predicament, though it might also have learned to study its decisions more carefully before issuing them.
Now that the price of lentils has risen to LE30 per kg, this might encourage Egyptian farmers to resume cultivating them. They could easily earn at least LE20,000 per acre. Fava beans, sunflowers, soy beans and chickpeas would also now be more profitable for farmers because of their higher prices.
It is quite sufficient that we are already the world’s leading wheat importer, the fourth largest importer of yellow corn feed, the fifth largest importer of palm oil and the seventh largest importer of soy oil. But it appears that there is little interest in agricultural development in government circles, in conjunction with ongoing disregard for the rights and welfare of farmers.
This is a recipe for a form of discontent that could jeopardise social stability. May God protect us from such ills and open the eyes of government officials.
The writer is a professor of soil and water sciences at Cairo University’s Faculty of Agriculture.