Subsidies thwart hopes for bigger Egypt sugar crop

Standing in front of his shop coating pastries in syrup, Yahya insists the government must do everything in its power to keep sugar cheap and within easy reach of every Egyptian.
But the government has found it increasingly hard to maintain subsidies on sugar, around 40 percent of which is imported, since a currency flotation last January led to the Egyptian pound losing 25 percent of its value against the dollar.
"Sugar makes our difficult lives sweeter. If it becomes too expensive, people will curse the government's failings every time they have a cup of tea or coffee that they can't put sugar in," Yahya said.
Officials say they will try to boost local production by attracting private companies to produce sugar, but local traders say the government should drop subsidies or investors will spurn a market laden with artificially low-priced sugar.
"What sort of nonsense is it to have one government department working on encouraging private investment while another works on capping prices," said one Cairo-based trader.
Officials say Egypt consumes between two and 2.2 million tonnes of sugar a year, while producing around 1.4 million tonnes locally from both sugar cane and sugar beet.
Locally produced sugar is sold in one kg (2.2 lb) bags in government-run outlets throughout Egypt at a marginally subsidised price of 1.70 ($0.28) pounds.
Semi-subsidised sugar sells for 0.80 pounds and fully subsidised sugar for 0.60. The government distributes cards entitling people to different levels of subsidy depending on their income.
United States Department of Agriculture (USDA) figures conservatively estimate the production cost for a one-kilo bag of Egyptian sugar to be around 1.65 pounds.
Sugar analysts say the figure is unlikely to take into account a number of hidden subsidies including transport, retail margins and services provided by other state bodies, such as electricity.
Egypt's publicly run Sugar and Integrated Industries Co (SIIC), which produces around one million tonnes of sugar from cane grown in the south of the country, says land and water limitations mean only beet production can be increased.
Mahmoud Dawoud, head of project affairs at SIIC, said it would be offering its expertise as a contractor to private investors looking to produce beet sugar in Egypt.