CAIRO: Egypt has raised procurement prices for key agricultural products — wheat, corn, sugar cane and beet sugar — in a bid to encourage farmers to up production.
Essam Abdel Salam, press officer at the General Authority for Supply Commodities (GASC), told Daily News Egypt the decision is meant to encourage farmers to increase production by offering to purchase at prices higher than international rates.
The move is not a reaction to any food crises or supply shortage, he stressed, and instead is meant to increase long-term strategic supplies of the Egypt — the largest wheat importer in the world.
The Ministry of Agriculture set local wheat procurement prices at LE 350 per ardab, 45 percent higher than last season’s price, for fiscal year 2010/11, according to local reports.
The price may further increase to LE 360 per ardab, depending on the purity of the crop, Al-Masry Al-Youm reported.
The Ministry has also set the minimum price for corn at LE 250 per ardab, LE 280 per ardab as a minimum price for sugar cane (19 percent higher than last season), and LE 355 per ardab for beet sugar (25 percent higher), Beltone Financial cited the newspaper as reporting.
Abdel Salam said Egypt has more than fourth months of reserves supply, which is what former prime minister Ahmed Shafiq said when he first took office.
Higher procurement prices should translate into better profits for farmers, and in turn, higher incomes, leading to more consumption thus revitalizing the economy, he added.
Ahmed Abdel Ghani, agricultural expert at investment bank CI Capital, told DNE that the ministry’s decision was sound since farmers had been calling for an increase in wheat prices to match the increasing input costs for agriculture.
“Wheat is now LE 350-360 up from LE 240-250 last year, so this is a significant increase,” he said.
According to Abdel Ghani, farmers made on average LE 6,577 profits per feddan from sugar cane, while wheat profit was only LE 6,344 per feddan, which is why farmers always choose to plant sugar cane because it is more profitable, even though wheat supplies are needed.
The problem with the decision, according to Abdel Ghani, is that — as usual — the announcement came right before the start of the crop season in April.
Egypt consumes 16 million tons of wheat of which only 8 million is planted domestically and 3 million are imported by the government to meet local demand.
According to Abdel Ghani, the rest is kept by the farmers for personal use or is lost as leakage from transportation.
“This will however, have a positive effect on the next season and will help increase wheat supplies in the long run,” he said.
He called on the agriculture ministry to continue raising prices every year progressively compared to world prices, making it more profitable for farmers.
“As you increase your supply you can be less volatile to price fluctuations and shortages in world markets,” he added.