Egypt’s domestic wheat harvest had reached near-record levels earlier this month, with around 5m tonnes recorded, up from the 3m-3.5m tonnes harvested in previous years. But the unusually high figure may be as a result of private suppliers misreporting their wheat stocks in order to get extra funds from the government, according to Reuters.
The Egyptian government is now conducting a recount into the harvest.
The country’s wheat harvest has long been plagued by fraud, as a result of the government’s high subsidies for domestically produced wheat – but attempts by the government to lower subsidies was met with widespread anger. The practice of mixing in foreign wheat with domestic cost Egypt around US$112m in 2015, according to its agriculture minister.
Restrictions up costs, cut income
This latest wheat scandal comes shortly after the US Department of Agriculture released a damning report into Egypt’s agricultural sector, which claimed poor practices cost the country hundreds of millions of dollars a year, either in direct cost or lost opportunities.
“Certain Government of Egypt agricultural regulations cost the country dearly, eating away at precious foreign exchange, distorting trade, hindering private initiative, and undermining innovation. Unfortunately, the end result is higher food prices paid by Egypt’s overburdened consumers, in complete dissonance with the government’s efforts and trumped up claims that it’s trying to make food more affordable,” said the report.
Egypt’s unwillingness to export its rice surplus was the single biggest cost, said the USDA: “If Egypt allowed the market to work its course, it would be able to sell close to 1m tonnes of rice in the international marketplace at close to US$600/tonne. However, using the past as an indicator, in 2016 Egypt will export just 200,000 tonnes and sell the rest, [3.8m tonnes] domestically, at a significant discount of US$300/tonne.
“For the export value this rice would garner, it will short-change itself close to US$500 million in precious foreign exchange earnings the economy so desperately needs,” the report added.
Egypt’s approach to food imports also costs it dear, with the USDA estimating its ergot restrictions for wheat imports will cost up to US$82m, wheat tender requirements up to US$100m, and ambrosia restrictions up to another US$100m. In addition the USDA called out Egypt’s policies towards poultry and soybean imports as being highly inefficient and protectionist.
‘Negative-sum game’
“Despite its positive steps in terms of reforming food subsidies, viewed as a package, the government’s efforts end up being a negative-sum game as any savings consumers could have capitalised on are eroded by regulatory burdens. It also fails to provide an alternative source of cheap protein to those that can least afford it by imposing a ban on poultry parts, a product that would be an affordable source of animal protein that would not truly compete with Egypt’s domestic poultry industry as the intended consuming audience otherwise views poultry as a luxury item,” said the report.
“Egypt can reverse course, improving social welfare significantly, while protecting its plant and animal health. But it needs a concerted effort from its regulators and policymakers to do what is best for Egypt. As it is, zero tolerance on things like ergot and ambrosia… increase the price of imports with no added value to Egyptian agriculture or its consumers,” the report concluded.