US wheat exports recapture Egyptian market

The US Agriculture Department's attache in Cairo released the following report, dated February 18, on the outlook for Egypt's grain sector.
US wheat exports recapture the Egyptian market but private sector wheat imports continue to decline due to the government's intervention in the traditionally unsubsidised flour market.
Egypt's total corn imports are expected to decrease by about 17 percent this year due to the continuing devaluation of The Egyptian pound, but US yellow corn exports are expected to continue to dominate the market.
Wheat is planted in October/November and harvested in April/May. According to the Ministry of Agriculture, total wheat area for the MY 2003/2004 is estimated at 1,038,000 hectares (HA) or about 3.7 percent over the 2002/2003 area.
For MY 2004/2005, the area is expected to be about 1,050,000 HA or 1.2 percent over the 2003/04 level due to adequate rains at the optimum time.
The rain feed area is estimated at 84,000 HA but usually only 21,000 HA are harvested.
Total production for MY 2003/2004 is expected to be 6,5 million metric tons (MMT) compared to 6,3 MMT for MY 2002/2003. This increase is expected to occur due to the increase in area planted with wheat, and the use of high yielding varieties.
Total consumption of wheat in MY 2003/2004 is expected to reach 12,829,000 MT, or 6.2 percent higher than the 2002/03 level. The price of unsubsidized breed in Egypt has been on the increase since September 2003 due to declining wheat imports by the private sector.
The price of unsubsidized bread increased by about 25 percent since September 2003. Lack of foreign exchange availability for private sector importers and the continuing devaluation of the Egyptian pound in addition to high international prices for wheat have resulted nearly 100 percent private sector flour increase at the wholesale level.
The government plans to spend LE 770 million this year to subsidise the price of Fino bread for school. As a result, most private sector mills are increasingly finding difficult to buy wheat.
In fact, many private sector mills are now operating at only 20-30 percent of normal capacity and some of them have stopped operating. Although the production capacity of flour mills normally far exceeds demand, the operating capacity of the country's 30-35 modern mills normally operate at 60-65 percent in a given year.
The Egyptian milling industry has more than adequate capacity to cover the country's need for 72 percent extraction flour. While total consumption of 72 percent extracted flour is estimated at 1.8 MMT or 2.5 MMT of wheat, the total milling capacity is currently estimated at 2.7 MMT of 72 percent flour, or 3.76 MMT of wheat.
There are about 36 private sector commercial mills with total capacity of 9,000 MT per day (2.8 MMT annually) as compared with 24 mills with total capacity of 6,350 MT per day (1.9 MMT annually) last year. These are permitted to produce only 72 percent flour.
Because of the government's intervention in the traditionally unsubsidised portion of the market, the Holding Company mills are in a position to sell 72 percent extraction flour at LE 900-950 per MT while private sector mills have to market the same flour at LE 1,800 per MT or more. If this situation remains, several private sector mills will likely be forced to shut down in the near future.
Since July 2003 through February 8, 2004, Egypt's total wheat purchases are estimated at about 4 MMT, of which 77 percent was imported by the government and the rest was imported by the private sector.
According to wheat traders, the private sector did not import any wheat during December 2003 and January 2004.
Ministry of Supply (GASC) imports are expected to reach 6 MMT of wheat this year: 4.5 MMT of soft wheat for the production of 82 percent flour for the production of subsidised baladi bread and 1.5 MMT for the production of 72 percent flour for the production of fino bread.
In addition, GASC plans to purchase 3 MMT of locally produced wheat and 500,000 MT of locally produced white corn.
However, in 2002/03 GASC was able to purchase only 2 MMT of locally produced wheat and 350,000 MT of locally produced white corn for the production of subsidised bread.
The subsidy on baladi bread is estimated to cost the government about LE 5.8 billion this year as compared to 3 billion last year. Most of the domestic wheat is either sold to the Ministry of Supply or retained by farmers for on-farm consumption.