Report Highlights:

MY 2015/16 wheat imports are forecast at 11.5 million metric tons (MMT) in line with USDA's official estimate. Growing feed demand by the poultry, aquaculture and livestock sectors will maintain corn imports at its current level of 8.0 (MMT) in MY 2015/2016. Post expects Egypt's rice exports to resume after the government allowed the resumption of exports of milled rice for six months effective October 4, 2015. Post estimates rice exports at 400,000 MT, a 60 percent increase from MY2014/15.

Wheat

Production

Post is revising downward its MY2015/16 (July-June) production forecast from USDA official estimates of 8.36MMT to 8.1 MMT, a 3.2 percent reduction due to a decrease in area planted, as farmers substituted more profitable crops for wheat.

Consequently, planted area is reduced to 1.26 million hectares (ha) from USDA's estimate of 1.36 million ha, a reduction of over seven percent. Nonetheless, yields increased, as much of the 100,000 ha of land used for other purposes is of a more marginal nature. Moreover, the decrease in area can be explained in light of the following:

  1. Due to increased animal feed prices, farmers grew more berseem or Egyptian clover for livestock feed rather than growing wheat, which has become very profitable for many farmers, especially if farmers follow the recommended agronomical practices for growing berseem by the Field Crops Research Institute (FCRI) of the Ministry of Agriculture and Land Reclamation (MALR) .
  2. Many farmers in Upper Egypt have begun using their small acreages (0.5-1 ha) to grow medicinal herbs and spices, and vegetable production via contract farming with exporters and processors.
  3. Many farmers growing wheat on areas less 0.5 ha in the delta are suffering from urban encroachment which has affected the productivity of soils. Urbanization and population growth of two million people annually present a continual challenge to traditional agricultural land use.

Availability of quality and improved seed varieties is a key factor in MALR's strategy to increase local wheat production. MALR is aware that farmers' knowledge of seed variety is limited and most of their choices for seeds are based on personal experiences or others' experiences.

To address the knowledge gap, MALR is increasing its extension efforts and in MY2015/16 began distributing 18 high-yielding seed varieties to farmers through the Central Agency for Seed Production (CASP) and agricultural cooperatives in various governorates.

In addition, CASP recommended the adoption of specific agricultural practices, which can easily bring yields up to 6.5 MT/ha. CASP set the price of a 30 kg bag of wheat seed at LE 150 ($19).

CASP pledged to provide forty percent of the total seed needed during the season, with the remaining area using sixty percent of wheat from farmers' previous crop. One hectare uses about 140 kg of seeds, bringing the cost to plant a hectare to $88.In the near future, MALR is planning to introduce an extension package and showcase high yielding varieties in more than one thousand extension fields, such as Gemiza 11, Shandaweel 1, Misr 1 and Misr 2.

Procurement Price

On September 8, 2015, MALR announced that wheat procurement prices for the 2016 crop would be unchanged from MY 2014/15, at a price of LE 420/ardeb, or $353/MT. Given that the difference between the price of Egyptian wheat and imported wheat ranges from $160 to $190/MT, there is a strong incentive to game the system, as we saw with the crop harvested in mid-2015. On the other hand, some agricultural cooperatives have stated that the procurement price is not profit enabling, demanding a higher price because the cost of inputs and harvesting has increased.

Consumption

In MY 2015/16, post forecasts total wheat consumption at 19.6 MMT, in line with USDA's estimate. Food, seed and industrial use (FSI) consumption will increase by 1.1 percent from USDA's forecast of 17.6MMT. The anticipated rise in consumption of wheat is driven by high demand for bread by a population that is growing at a rate of 2.6 percent annually.

Subsidized "baladi" bread is still priced at five piasters per loaf, and beneficiaries are entitled to up to 150 loaves a month through a monthly cash subsidy on a smart card, which can be redeemed at any of the participating privately-owned grocery stores partnering with the Ministry of Supply and Internal Trade (MOSIT), or at the publicly-owned consumer complexes.

In FY2015/16, the GOE allocated LE 38 billion ($ 4.8 billion) to finance the program, a 22.5 percent increase from 2014/2015. The increase in the food subsidy budget is driven by the expansion of the government's smart card program, providing a family of four members a direct cash allotment of LE 60/month ($7.6) to spend on over 40 food items, in addition to six million new beneficiaries that are expected to be registered in FY2015/16.

A survey conducted on August 28, 2015, measuring customer satisfaction, indicated that 54.6 percent of the respondents were satisfied with the program due to improved access to bread, disappearance of long lines at bakeries, and the removal of a black market of pilfered wheat flour. However, 45.4 percent of respondents were not happy with the program, stating difficulties in obtaining a smart card, especially if the beneficiaries birth place is different from their place of residence, technical problems with processing the smart cards, lack of surveillance and monitoring of bakeries' ensuring proper size and weight per loaf, and an insufficient availability of subsidized loaves, with demands to increase the number of loaves to seven or eight per person per day from the current five.

Trade

There are no changes in trade numbers from USDA official numbers of 11.5MMT for MY 2015/16.

Since July 1, 2015, the total amount of wheat purchased by the General Authority for Supply Commodities(GASC) is 2.365 MMT, higher than GASC imports during the same period in 2014/2015 which amounted to 1.9MMT. Top suppliers are Russia with 1.525MMT, Romania with 300,000 MT, Ukraine with 290,000 MT and France with 240,000MT.

Government imports by GASC Since July 1st 2015

Tender

No

Tender

date

Origin

Tonnage

/MT

Total

/MT

Tender

No

Tender

date

Origin

Tonnage

/MT

Total

/MT

1

07/01/2015

Romania

60,000

60,000

8

08/28/2015

Ukraine

55,000

55,000

2

07/09/2015

Russia

Ukraine

120,000

60,000

180,000

9

09/ 03/2015

Russia

170,000

170,000

3

07/15/2015

Romania

Russia

120,000

115,000

235,000

10

09/18/2014

France

Russia

60,000

175,000

235,000

4

07/21/2015

Russia

175,000

175,000

11

10/ 03/2015

Russia

Ukraine

180,000

60,000

240,000

5

08/5/ 2015

Russia

120,000

120,000

12

10/09/2015

Russia

Romania

120,000

60,000

180,000

6

08/13/ 2015

Russia

Ukraine

60,000

115,000

175,000

13

10/15/2015

Russia

Romania

180,000

60,000

240,000

7

08/27/2015

Russia

60,000

60,000

14

10/29/2015

France

Romania

Poland

120,000

60,000

60,000

240,000

Private sector imports (July-September 2015) amounted to about 1.0MMT, less than private sector imports during the same period (July-September 2014) by 0.5 MMT, mainly driven by increased difficulty in accessing dollars. The private sector expects to increase imports in the coming months in order to capitalize on lower world wheat prices.

Stocks

Post is revising wheat stocks downward from USDA's official forecast by 4 percent, making up for lower production, and a reduction in imports by the private sector.

GASC, the major wheat importer, tries to maintain a five-month supply of strategic stocks. However, limited storage capacity constrains the government from reaching its target; therefore, it redefined strategic stocks to include wheat import purchases in the pipeline, amounting to about three months of annual consumption. Under this new definition, GASC is able to meet the threshold for strategic reserves.

Existing wheat storage capacity in Egypt is 5.2 MMT. The Principal Bank for Development and Agricultural Credit (PBDAC) has 364 shonas with a storage capacity 2 MMT used for the local harvest.

Shonas are a system of traditional open air storage and are distributed throughout the country.

The poor quality of this storage causes significant losses that amount up to 10-15 percent of post-harvest loss. To address post-harvest storage losses, a program to modernize in its first phase, 93 shonas and build warehouses was undertaken in 2015. This warehousing construction project is being implemented by the Ministry of Defense's Engineering Authority along with the Egyptian Holding Company for Silos and Storage (EHCSS).

Blumberg Grain, a new-to-market U.S. company, won a contract to equip the 93 warehouses with bagging, security and temperature control technology. EHCSS currently has 1.5 MMT storage capacity used for imported wheat, while public-sector flour mills have 700,000 tons of storage capacity.

The private sector's storage capacity is around 1 MMT, located in port facilities or close to the ports. To alleviate the shortfall in capacity, the GOE instituted the National Silos Program, which in its first phase built 25 silos with a storage capacity of 750,000 tons that are administered by the EHCSS.

Wheat

2013/2014

2014/2015

2015/2016

Market Begin Year

Jul 2014

Jul 2015

Jul 2015

Egypt

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

1350

1350

1350

1350

1360

1260

Beginning Stocks

4621

4621

4328

4328

4252

4252

Production

8250

8250

8300

8300

8360

8100

MY Imports

10170

10170

11063

11063

11500

11500

TY Imports

10170

10170

11063

11063

11500

11500

TY Imp. from U.S.

419

419

156

156

0

0

Total Supply

23041

23041

23691

23691

24112

23852

MY Exports

213

213

339

339

350

250

TY Exports

213

213

339

339

350

250

Feed and Residual

2000

2000

2000

2000

2000

1800

FSI Consumption

16500

16500

17100

17100

17600

17800

Total Consumption

18500

18500

19100

19100

19600

19600

Ending Stocks

4328

4328

4252

4252

4162

4002

Total Distribution

23041

23041

23691

23691

24112

23852

(1000 HA) ,(1000 MT)

Corn

Production

MY 2015/16 corn production and planted area remains unchanged from USDA's official estimate of 6.0MMT and 750,000 HA respectively. The bulk of domestic production is white corn, while yellow corn production area accounts for 20-25 percent of the total area.

Despite promises, MALR failed to set a procurement price and develop a much touted marketing channel, which included formulating a contract between the Union of Poultry Producers (UPP) and several farmer unions to purchase corn at a predetermined price.

Farmers were also hoping to sell their output to the Ministry of Supply and Internal Trade (MOSIT) which rejected the idea of mixing corn with wheat for the production of subsidized baladi bread at a rate of 20 percent corn and 80 percent wheat, due to a limited number of corn drying facilities which are not up to standard.

Consumption

Post forecasts MY 2015/16 consumption to remain unchanged from USDA's official estimate of 14.5MMT. With a daily consumption of 161 grams per capita, maize is a staple food in Egypt.

The poultry, aquaculture, dairy and livestock industries in Egypt are expanding and are the major drivers of the increased consumption that has occurred in the last five years, increasing at an annualized rate of 5 percent. Poultry is the leading industry consisting of over 15,000 farms, with investments of more than $4.2 billion, and employing over 2 million workers. The growth in the poultry industry is increasing feed demand by approximately three-four percent annually.

Egypt's aquaculture is another dynamic industry, ranking number seven worldwide, but number two in tilapia production. Annual growth in the sector is forecast to grow at nine-ten percent in the next two years. The dairy industry is witnessing an annual growth of four to five percent, as the sector is rapidly industrializing due to the rising demand for fresh, refrigerated dairy products.

However, Egypt's current production of yellow corn covers less than 10 percent of its feed demand. Despite efforts to diversify the country's agricultural base, efforts will fall short to make any significant inroads in meeting the country's corn needs. For now, any increase in demand by the expanding feed manufacturing industry will have to be met by imports.

Trade

Post forecasts for MY 2015/16 imports remains unchanged from USDA's official estimate of 8.0MMT. Low domestic production coupled with high demand has made Egypt one of the largest corn importers in the world. From January to August, 2015 Egypt imported 5.2 MMT of corn.

Top suppliers are Ukraine, Argentina, Brazil, United States and Romania.

Like all traders, Egyptian grain importers, especially since new controls took effect in February 2015, faced foreign currency shortages which hampered their ability to efficiently import and discharge corn shipments in a timely manner. The UPP submitted a request to the prime minister to solve the impasse, on the basis that the crisis is threatening the Egyptian poultry sector.

The demands by UPP and other industries led to the resignation of the Central Bank's governor and a new governor has been appointed. The new governor is currently studying several options to remove the restrictions set by the Central Bank in 2014.

The restrictions include a limit of foreign currency deposits not to exceed $10,000 a day, up to a monthly maximum of $50,000, severely limiting the availability of obtaining foreign exchange.

As of November 1, 2015 however, well over $500 million has been provided to clear a significant backlog in Egyptian imports of a wide range of goods.

DDGS

Egyptian purchases of US distillers dried grains with soluble (DDGS) dropped from 82,000 MT (Jan/May 2014) to 23,000 MT (Jan/May 2015). Post expect DDGs imports from the US will drop from 160,000 MT in 2014 to 50,000 MT in 2015 due to a weakened Egyptian Pound and limited access to the dollar.

Stocks

Post forecasts for MY 2015/16 stocks remains unchanged from USDA official estimate of 1.43MMT.

Corn

2013/2014

2014/2015

2015/2016

Market Begin Year

Oct 2013

Oct 2014

Oct 2015

Egypt

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

714

714

745

745

750

750

Beginning Stocks

1076

1076

2398

2398

1948

1948

Production

5800

5800

5960

5960

6000

6000

MY Imports

8726

8726

7500

7500

8000

8000

TY Imports

8726

8726

7500

7500

8000

8000

TY Imp. from U.S.

2875

2875

0

2700

0

0

Total Supply

15602

15602

15858

15858

15948

15948

MY Exports

4

4

10

10

10

10

TY Exports

4

4

10

10

10

10

Feed and Residual

11000

11000

11500

11500

12100

12100

FSI Consumption

2200

2200

2400

2400

2400

2400

Total Consumption

13200

13200

13900

13900

14500

14500

Ending Stocks

2398

2398

1948

1948

1438

1438

Total Distribution

15602

15602

15858

15858

15948

15948

(1000 HA) ,(1000 MT)

Rice

Production

Post forecasts milled rice production in MY 2015/16 at 4.0 MMT, similar to USDA's official estimate. Production is down 13.2 percent from MY 2014/15 due to higher-than-normal temperatures during August, which accelerated rice development and reduced grain weight.

The planted area in MY 2015/16 is revised upward to 800,000 ha from USDA official estimate of 660,000 ha. This area is much larger than the government's allotment of 452,000 ha, which is located in eight governorates in the northern Delta region.

The increase in rice area is attributed to an expected and significant reduction in cotton areas, due to problems associated with the Egyptian cotton industry.

Although, farmers planting outside the allotted area face a fine $454/ha, they still take the risk as rice is considered to be the cash crop of choice due to its high yields. Rice cultivation prevents seawater encroachment in the northern delta and does not affect the quota of the Nile water since its irrigation mainly relies on agricultural drainage water. Early maturing varieties develop in three months and consume 9500 to 11,000 cubic meters water per hectare.

Consumption

Post forecasts rice consumption at 4.0 MMT in MY 2015/16 similar to USDA's official estimate.

In 2015, the price of milled rice in the Egyptian market witnessed a reduction from $300/MT to $200/MT, due to export conditions set by the government in MY 2014/2015. The decrease of domestic rice prices, however, had little more than a marginal impact on consumption given Egyptians' strong preference for wheat based products.

On October 4, 2015 the Egyptian Minister of Industry and Trade announced that Egypt would allow milled rice exports for six months (October 2015 – March 2016) with an export tax of $255.43 per ton. The announcement resulted in a significant increase in the rice price all the way up to $ 270 per ton compared to the pre-announcement price of $200 per ton. In the process, it jump-started the activity of over 40 percent of the country's rice mills that had ceased operating as farmers withheld their stocks until prices improved.

Trade

Post's forecast for rice exports in MY 2015/16 is 400,000MT, similar to USDA's official forecast. At least 5,000 MT of this amount will be broken rice. The Ministerial Decree No.708 of 2015, issued by the Minister of Trade and Industry, requires exporters to pay an export fee in foreign currency that is exchangeable through a bank operating in Egypt.

The exporter must secure a documentary credit from the importer or ensure that the importer makes a bank transfer at full value. The exporter should than submit a banking certificate to customs before shipping. Post expects that the bulk of Egyptian rice exports to materialize between December to March of 2016 when market prices of Egyptian medium grain "sticky" rice are likely to be more competitive in the international market.

Stocks

Post forecast that rice stocks in MY 2015/16 will reach around 532,000 MT similar to USDA's official forecast.

Rice, Milled

2013/2014

2014/2015

2015/2016

Market Begin Year

May 2013

May 2014

May 2015

Egypt

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

770

770

650

650

660

800

Beginning Stocks

427

427

602

602

907

907

Milled Production

4750

4750

4530

4530

4000

4000

Rough Production

6884

6884

6565

6565

5797

5797

Milling Rate (.9999)

6900

6900

6900

6900

6900

6900

MY Imports

25

25

25

25

25

25

TY Imports

25

25

25

25

25

25

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

5202

5202

5157

5157

4932

4932

MY Exports

600

600

250

250

400

400

TY Exports

600

600

250

250

400

400

Consumption and Residual

4000

4000

4000

4000

4000

4000

Ending Stocks

602

602

907

907

532

532

Total Distribution

5202

5202

5157

5157

4932

4932

(1000 HA) ,(1000 MT)