Egypt to Remain Dependent on Imports16 September 2010
EGYPT - Egypt remains dependent on imports to meet demand in almost all agricultural sectors, particularly wheat.
According to the recently published report, Egypt Agribusiness Report Q4 2010, from Research and Markets, Egypt remains dependent on imports to meet demand in almost all agricultural sectors. In order to increase its longer-term food security, the country has been increasingly looking abroad, thereby joining the worldwide trend of import-dependent countries investing in farmland in foreign countries. In recent months, Egypt has looked to countries such as Sudan, Uganda and Ethiopia as potential sources of farmland; several deals to develop specific pieces of land have already emerged and more are expected to follow.
Meanwhile, in addition to spearheading efforts to boost domestic production in key agricultural sectors, the Egyptian government remains chiefly responsible for regulating agricultural imports. As the world's largest importer of wheat, Egypt is vulnerable to international supply disruptions. In July, following prolonged drought and the outbreak of fires in Russia, a growing number of observers suggested that Russia might implement a temporary export ban on wheat exports. The potential loss of Russia as a supplier of wheat has increased the possibility that other countries will emerge as major suppliers to Egypt.
The Research and Markets report predicts that wheat production will rise by 13.2 per cent to 2013/14. The growth in production will partly reflect government policies aimed at expanding agricultural production and decreasing import dependency. Both demand and production output are expected to recover in 2010/11, on the back of an economic recovery.
Although poultry represents the main source of meat-based protein for Egyptian consumers, demand for processed and packaged meat continues to strengthen as tastes and preferences develop. Beef consumption is forecast to increase by 17.1 per cent to 2014. Despite the expectation of strong beef production growth, Egypt will continue to meet its considerable supply shortfall with imported beef.
The report anticipates an 11.3 per cent increase in liquid milk production to 2014. Production growth will be driven by new and ongoing investments in the dairy sector, as well as strong demand on the back of rising incomes: consumption is expected to increase by 23.8 per cent to 2014; demand for cheese and butter is also predicted to grow.
Egypt will continue to rely on sugar imports in order to meet its supply shortfall. Despite this, strong production growth of 18.9 per cent is predicted to 2014. Multinational firms have begun to target Egypt's sugar refining industry. Most recently, in June 2010, it was reported that Egypt's state-owned Food Industries Holding Company (FIHC) had received offers from German and Japanese companies to build a EGP1.2 billion (US$209 million) sugar refinery.
Urban sprawl and limited water availability are both contributing to the loss of the little agricultural land there is in Egypt, with climate change also contributing to desertification. Meanwhile, disease remains one of the biggest threats to livestock production.
2010 real GDP growth is forecast to be 4.9 per cent – up from 4.7 per cent in 2009 – and is predicted to average 5.2 per cent from now until 2014.
Private consumption growth came in at a relatively low 3.8 per cent in Q1-Q3 of FY09/10, down from an average 4.8 per cent expansion recorded in the first half of the year. Relatively high unemployment – 9.4 per cent of the total active population in 2009 – and double-digit annual inflation (10.4 per cent in May) affected the population's purchasing power and in turn constrained the level of household consumption.
Although wheat production is expected to steadily grow, Egypt remains heavily-reliant on wheat imports to meet domestic demand, according to the Research and Markets report. Egyptians are some of the highest per-capita consumers of wheat in the world, consuming an array of breads, as well as pasta, as dietary staples. Despite having signed numerous wheat supply agreements with Russia in the first half of 2010, the outbreak of drought and fires in Russia in mid-2010 has cast doubt on Russia's immediate future role as a supplier of wheat to Egypt. Along with the prospect of higher wheat prices, Egypt is expected to look to other sources of imported wheat in 2010/11 including the US and possibly Argentina.
Egypt's dairy industry will continue to benefit from inward investment, as well as a more international outlook by domestic dairy producers which are eager to locate new sources of raw materials. In February 2010, it was reported that Gozour, the food unit of Egyptian private equity firm Citadel Capital, was in advanced talks to buy an Ethiopian food firm in its bid to boost self-sufficiency in raw materials. Although the Ethiopian company has not been named, it is thought that Gozour may be looking to Ethiopia as a potential source of dairy cattle and milk. Despite having already benefited from substantial amounts of investment, Egypt's dairy sector continues to be dominated by small-scale producers, many of which produce only a small surplus production which is sold to extended family members and the local community. The sector therefore offers considerable development potential.
On 1 July 2010, Egypt implemented a nationwide ban on the selling of live poultry, which had been in place since May 2009 in five governorates. The main purpose of the ban is to combat the spread of highly pathogenic avian flu (HPAI; bird flu). Under the new law, only licensed slaughterhouses with a resident veterinarian are allowed to handle live poultry. The new ban is just the latest initiative by Egypt's government aimed at enhancing efficiency and improving standards within the poultry sector. Although recent months have seen efforts to tighten licensing restrictions on the nation's poultry farms, one consequence of this has been an increased shortfall in demand. In the medium term, Egypt is expected to retain its reliance on imported poultry in order to meet a domestic supply shortfall.
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