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The Egyptian and Californian tomato farmers and the galabaya mafia

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Iris Boutros

Iris Boutros

“I am a farmer. My father was a farmer. My grandfather was a farmer. But I only now learned how to farm.”

These are the proud words of an Egyptian small farmer whose tomato yields topped those of a typical Californian farmer. And proud he should be. He produced 82 tons of tomatoes per feddan of land. He did it with manual labour. The mechanised Californian farmer produces about 50 tons of tomatoes per acre on average. (A feddan and an acre are roughly the same size, give or take.)

Let that sink in. An Egyptian small farmer was able to produce about 32 tons of tomatoes more than a California tomato farmer on roughly the same size plot of land. Simply stop to consider that difference in productivity, 32 tons, on that small piece of land. Think about that accomplishment. And then know that to fully understand how this is a really spectacular achievement, is to know more details about the vastly different realities of these two farmers. For sure, both farmers face high levels of uncertainty and risk. But the Egyptian small farmer lives a nightmare. In the midst of the current cabinet’s clearly declared strategy to reduce food costs and improve agricultural supply side efficiency, this tomato story should give insight into some of the ways to best help Egypt’s farmers.

One dysfunctional market or another

To grow food, a farmer needs land, inputs, water, labour, technical assistance, technology, information and money. And the Egyptian farmer’s realities in all of these markets are bleak, for both large and small-scale farmers. It is a difficult business. Land is highly fragmented, with 80% of total plot holdings under 11 feddans, making economies of scale achievable by very few farmers. Dirty irrigation canals and inconsistent water supply lead to lower crop productivity, not to mention the health effects of growing food with dirty water. Absent technical assistance keeps labour and total productivity down. Low levels of technology transfer for most crops reduce the intensive farming production margin; meaning little value is created from existing and known farming technologies for increasing agricultural output with the same land.

 

Government interventions in agricultural markets also don’t help. Farmers often pay double the public guaranteed prices in black markets for crop production inputs and are sold diluted, inert or ineffective products because of corruption and mismanagement. And these costs have been rising. The government-owned Principal Bank for Development and Agricultural Credit has low market penetration and is better at keeping Egyptian small farmers indebted for life than providing a meaningful credit source. Egyptian farmers face one dysfunctional market or another for the most basic resources needed to grow food. In short, to be a small farmer, is a living hell.

In stark contrast, a California tomato farmer has it much easier. Land markets are healthy and competitive, with farmers easily achieving economies of scale. Water supply and quality are rarely an issue, with significant resources dedicated by government agencies and civil society organisations to monitor quality. The high degree of access to technical assistance and new technology and equipment makes labour and land highly productive. Access to credit and other financing is abundant. But it’s not all easy. Rain-fed agricultural lands have major climate risks. Multinational conglomerates are driving the small American farmer out of business. And export markets are increasingly unwelcoming of American production because of the pervasiveness of genetically modified crops. The bottom line is that farming is not easy anywhere, with high levels of risk and uncertainty as central challenges to these businesses. But for sure, if you are a tomato farmer, you would rather be in California than Egypt.

Making it a more fair fight

Given these drastic differences in the ‘rules of the game’ of farming, it is ever-more astonishing to hear about a small Egyptian tomato farmer that produced 32 tons of tomatoes more than the average Californian tomato farmer’s output on roughly the same size plot of land. Even more when you consider that the Egyptian farmer did so through labour intensive farming, versus his counterpart who runs a largely mechanised farm. If you think about the increased ‘obstacles’ the Egyptian farmer faces, it’s like winning a boxing match with a knockout punch with one hand tied behind your back.

The secret wasn’t magic seeds. Someone just made it a more fair fight. The Global Development Alliance, a public-private partnership between H.J Heinz and USAID, working with an American NGO, ACDI-VOCA as implementers, made it a more fair fight. Before this work, you could buy some of Heinz’s world famous ketchup in Egypt in not only its original colour, but also in orange, other shades of red, and even in brown. Domestic food processors making the famous ketchup sourced particularly poor quality tomatoes and so the final ketchup product was often also of poor quality and far from consistent with the Heinz recipe. To maintain the integrity of its famous brand, Heinz joined with USAID and ACDI-VOCA to work with both food processors and small tomato farmers to produce a better quality and more consistent product.

Small farmers benefited from proper inputs, technical assistance and information. On average, participating farmers produced about 35 tons of tomatoes per feddan of land. Before, typical production was 15 to 18 tons of tomatoes per feddan, with some regional variation. That’s about a 100% improvement on average. And one farmer was able to produce 82 tons of tomatoes per feddan. His production alone was 3.5 times the average production, before the investments, and with the same water and land. Food processors had better quality, more appropriate variety tomatoes at lower total costs, with product traceability and application of global industry standards, which led to higher profit margins. The Heinz ketchup on supermarket shelves is now closer to its original formula colour.

Enter the galabaya mafia

Small tomato farmers also received spectacular benefits in their market access. Before this public-private partnership, small farmers typically sold about 40% of their crop to wholesalers, known to some in the business as the galabaya mafia (after the traditional Egyptian man’s garment). Of the remaining 60%, 15% went to market through other channels, 1% to exporters, 2% to processors and a massive 40% to waste, on average. With the little market access Egyptian farmers have, the galabaya mafia has extraordinary power to significantly control prices farmers are paid and the price consumers face. The more than 1,800 participating farmers now have other outlets to sell their product. They worry less about the galabaya mafia. But for the majority of the 3.5 million small Egyptian farmers, most of their hard work goes to the rubbish bin and the galabaya mafia. And they are not the price setters in that relationship.

Respecting the low-income producer, not just the consumer

Now, in Egypt’s never-ending fight, the current government is trying to contain ever-rising food prices with social justice concerns for the low-income consumer. Prime Minister Hazem El-Beblawi, also head of Egypt’s economic ministerial group, agreed in a meeting on 23 September to impose mandatory commodities prices, since the ministerial group feels merchants overestimate. Merchants were given a grace period of a week for prices to return to normal. Otherwise, the cabinet group will act to impose fixed prices the following week. This would aim to counter price inflation, particularly the rapid price increases in wholesale and retail food trading.

The cabinet’s strategy has two main components: price fixing and developing the internal trade system. As Minister of Industry and Foreign Trade, Mounir Fakhry Abdel Nour has said, the government will not allow “unjustified increase” in prices and it has a commitment to providing basic items to meet the needs of consumers with reasonable prices. In other words, the cabinet is concerned about the low-income consumer. In the second component of the strategy, the cabinet will aim to “improve the efficiency of the supply side, which [in turn] will balance the market automatically and lower prices”. This part of the strategy should certainly be concerned with the low-income producer.

From inputs to final sale, with upward cost pressures, ever-squeezed profit margins, and extensive government market intrusion, the Egyptian small farmer faces traitorous markets. I greatly respect the work made possible by this public-private partnership, for what was achieved by Egyptian small, tomato farmers. We often see that the focus is on the low-income consumers. But given Egypt’s poverty profile and small-scale of most of its farmers, these are also our low-income producers. These are the challenges they face. These are the accomplishments they can achieve when it’s a more fair fight.

As one third-generation (at least) farmer said, he never before knew how to farm. This great potential in Egypt’s small farmers is also why Makro, the German-owned international supermarket chain, has taken a chance on them. And when you speak to the Makro folks about their suppliers, they seem pleased with the products they buy. Now, it seems that the cabinet can learn from this example as it develops its strategy to improve the efficiency of the supply side. To me, the clear message is that given a more fair fight, Egyptian small farmers cannot only grow their own, but they might even beat some that are in an easier fight. My hope is that more of them are afforded the chance.

About the author

Iris Boutros

Iris Boutros

Iris Boutros is an economist and strategist. She focuses on growth, impact investment, and decision-making. Follow her on Twitter @irisboutros


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