Farmers unhappy over Egyptian government-set prices for wheat

Weddings may be down this year with the government proposing a low rate for the produce of the farmers.
Sunday 29/04/2018
Money feud. A farmer harvests wheat in a field in the Beheira governorate, north of Cairo, on April 4. (Reuters)
Money feud. A farmer harvests wheat in a field in the Beheira governorate, north of Cairo, on April 4. (Reuters)

CAIRO - Egyptian food security is at risk because tens of thousands of farmers are threatening to stop growing wheat against the backdrop of feuds with the government on crop prices.

The wheat harvest, expected to begin soon in Egypt, is usually a time of joy in the countryside with farmers preparing grain for sale and expecting major revenue streams. Farmers, however, have been baffled by wheat prices announced by Egypt’s Ministry of Supply, the only buyer of the grain.

“The prices announced by the government cause huge losses to the farmers,” said Nasser Abdel Gawad, one of thousands of wheat farmers in the southern province of Qena. “If I sell the wheat at the declared rate, I will not even be covering the cost of growing the product.”

The Egyptian Ministry of Supply said it would purchase wheat (with a purity rate of at least 23.5%) from farmers at 600 Egyptian pounds ($34) per 150 kilograms. Wheat with a purity of 22% would bring in 570 pounds ($32) per 150 kilograms.

Egyptian farmers said they were receiving $200-$230 per tonne of wheat. International wheat prices are about $246 per tonne.

The Supply Ministry disputed the claim, asserting that it is offering $11 higher than the international price. However, with the Egyptian pound down against international currencies, the issue is in flux.

Farmers stressed the price of wheat production — fertiliser and farming machinery — has risen dramatically. The wages of farm workers have also risen, along with land rents. That leaves the price for growing wheat much higher than it was a few years ago, cutting into profits.

“This is why the price of selling the produce does not equal the suffering sustained in growing it,” Abdel Gawad said. “Some of the farmers are in debt, even after they sell the produce.”

Egypt has approximately 1.2 million hectares cultivated with wheat this year and is expected to produce 4 million tonnes of grain. However, the country needs about 9.5 million tonnes of wheat to cover domestic needs. Egypt, which is the world’s largest buyer of wheat, plans to import 7 million tonnes of wheat in the 2018-19 financial year, Reuters reported.

Egypt relies on wheat to produce billions of loaves of bread for the approximately 80 million Egyptians registered in the national food rationing system.

Reports indicate that Egypt hopes to pay an average price of $220 a tonne cost and freight for the wheat; however, there are indications that this could rise to $280 a tonne.

“By paying more for the imported wheat, the government is buying this wheat at the expense of the local farmers,” said Nader Noureddin, professor of soil and water sciences at Cairo University’s Faculty of Agriculture. “The price the government wants to buy the local wheat for is totally unfair for the farmers.”

The wheat harvest season has its own peculiarities in the Egyptian countryside. The money farmers earn from selling the wheat fuels major expenses, including weddings. There is a sharp rise in the number of weddings in the post-wheat harvest season in Egypt’s countryside.

However, weddings may be down this year because of the government’s expected prices for wheat.

“We have decided this price after calculating the cost of production,” said Mohamed Suweidi, the spokesman for the Ministry of Supply. “Farmers who sell their produce for this price will end up making a profit.”

The farmers can either sell the produce to the ministry or feed it to livestock but they cannot legally sell to the private sector, leaving the Ministry of Supply as the only game in town.

Wheat is a big issue in Egypt. Egyptians favour a diet heavy on the grain and its extracts, particularly bread and pasta. An average Egyptian consumes around 175 kilograms of wheat every year; the international wheat consumption rate is 100 kilograms, unofficial studies indicate.

Threats by farmers that they will not grow wheat next year and plant a more profit-friendly crop could threaten Egypt’s dependence on wheat.

“This will also mean that we will have to depend more on imports,” Noureddin said.

Egypt specified $1.2 billion in the 2017-18 budget to buy wheat on international markets. Lower national production would mean Egypt would have to spend its limited foreign currency reserves on wheat imports.

This is what wheat importers want, observers said, with allegations of corruption in the sector. Local importers are accused of buying third-class wheat from international markets and selling it to the government at first-class prices.

When Egyptian farmers sell the wheat to the government, they must deliver the crop to state-operated silos. In 2016, amounts of wheat delivered to the silos were much lower than those registered in official records.

This meant that the government paid for wheat that it did not receive. The money went to silo officials in a scandal that resulted in the supply minister being fired.

“There is huge corruption in the wheat business in this country,” said Mahmud al-Asqalani, spokesman for the Citizens Against Price Rises group. “The corruption has reached dangerous levels and it is all at the expense of the poor consumers and poor farmers.”