CAIRO: Egypt said it will be taking strides to cut wheat prices over the long term by slashing the cost of seed, the local press reported.
The Ministry of Agriculture said that it would cut the price of wheat seeds by almost 50 percent to LE 85 per bushel. Other winter crops, according to the ministry, would be slashed by 40 percent.
The move, according to some economic analysts, is part of a continued effort by the government to keep control over food prices so that they don’t spiral out of control the way they did in early 2008.
“The decline in seed prices should positively impact agricultural costs, wrote Reham ElDesoki, a senior economist at Beltone Financial.
A couple of years ago, the government opened up wheat imports to the private sector. While the move was heralded by observers, some have said that it has taken the government some time to make the switch and stabilize prices under the new system.
“I don’t think the private sector was the problem itself, but it was the change in the system, said Mohamed Omran, an independent Egyptian economist.
Analysts who follow wheat prices say that the government doesn’t follow any ideologically driven policy, but that it has been driven by a pragmatic aim to manage prices and prevent the kind of crisis that drove people to the streets early last year.
It also tries to keep the cost of wheat consistent with world prices.
“With wheat prices in Egypt, said Omran, “the government does not have a specific policy, but it tries to keep wheat prices at a specific level that corresponds to world prices.
Some analysts, though, assert that the government has fallen short in this regard.
“We believe, wrote ElDesoki, “that the decline in seed prices is not consistent with the larger decline in international commodity prices.
Wheat, though, is not the only consideration when the government regulates the price of seed. As one crop or another becomes more cost effective for farmers, the country sees shifts towards those crops, leaving some foods in heavy supply, while farmers abandon others.
The government has long used price regulation, especially of seed, as a tool for maintaining balance in the crops grown domestically.
Since the onset of the global economic crisis a year ago, wheat prices have slid across the globe. Egypt, though, less affected by the economic crisis than other developed countries, did not see the major slide in commodity prices that others did.
Since then, the government has embarked on a campaign to bring food prices into lockstep with the international market.
As international prices have fallen, Egyptian growers found themselves less competitive. Since this change took place, the government has taken strides to boost domestic growers and keep wheat prices low.