Beef has always been an integral part of the Egyptian dinner table. In the past 40 years, beef prices have witnessed dramatic changes and various challenges. The first significant beef crisis began during the presidency of Anwar Al-Sadat, when red meat prices—among other items following subsidy cuts—rose in 1977 to EGP 1, which aroused the anger of the people, who took the streets in protest chanting “Sayed Marie, Sayed bey, a kilogram of meat has reached one pound. ” Sayed Marie was speaker of parliament at the time. As a result Al-Sadat rolled back the subsidy cuts, and launched the “National Veal Project”, which prohibited the slaughter of live female cattle less than two years of age, and ordered a one month meat boycott. However, 40 years later, meat challenges still exist and prices have soared to around EGP150 for a kilogram of beef.
By Mohamed Samir
Egypt’s current beef production
1.85 million were raised in 2017, forecasted to increase to 1.93 million in 2018, according to United States Department of Agriculture Foreign Agriculture Service (FAS)’s “Egypt Livestock and Products Annual 2017” report, which attributes the increase in overall calf numbers to the government’s improved disease control measures and immunisation programmes, as well as setting minimum weights for slaughter.
While the overall number of Egyptian cattle is estimated at around 9 million (cows and buffaloes) in 2017, rising 5% above Egypt’s Ministry of Agriculture and Land Reclamation (MALR)’s estimates in 2016 at 8.5 million (4.7 million cows and 3.8 million buffaloes) animals.
Moreover, the report forecasts that Egyptian beef production will reach 365,000 tonnes in 2018, up 5,000 tonnes compared to 2017, as a result of the slight increase in cattle slaughtered, predicted to reach 1.7 million, up by 10,000 compared to 2017.
How the tides have turned? Government efforts to increase local meat production
In February 2017, Egypt’s parliament voted in favour of installing a new deputy minister for animal wealth, fisheries, and poultry within the MALR. The new deputy minister is responsible for the development of Egyptian livestock and increasing beef production.
On February 13, Minister of Agriculture and Land Reclamation Abd El-Monaem El-Bana
issued a ministerial decree prohibiting the slaughter of live male cattle less than two
years of age; however animals weighing 400 kilograms and imported cattle are excluded from this prohibition. The report indicates, citing sources, that the new measure will increase cattle numbers and improve overall beef production while easing beef prices.
Moreover, the ministry is leading the nationwide animal disease vaccination campaign, which also includes the registration and the tagging of the nation’s cattle. Expanded vaccination combined with registration and tagging is deemed of crucial importance for the control of infectious disease.
However, the report indicates that enforcing the age-and-weight restriction may pose a challenge for the government given the number and scale of cattle breeders, since the majority of them are small-scale farmers who are located in smaller villages, where they depend on local butchers for slaughter, operating largely in the informal economy.
Egypt’s national veal project
Plans to renew the national veal project were announced in May. This project targets young farmers and recent graduates, providing them with loans for the purchase of cattle and feed. The Principal Bank for Development and Agricultural Credits (PBDAC) has allocated EGP 300m ($16.7m) to support the project and amended its loan terms and conditions to encourage additional small-scale farmers to apply.
Currently, applicants are eligible for loans of up to EGP 400,000 ($22,300), while companies and cooperatives are eligible for amounts up to EGP 2m ($111,000). The loans carry an interest rate of 5%.
Earlier in July, the ministry announced that the national veal project’s board of directors has
approved loans worth EGP 82.9m ($4.6m) for the purchase of animals and feed, EGP 59.8m ($3.3m) of which was for 518 farmers and used to purchase 6,881 calves.
Moreover, the board has approved a new portion of loans worth EGP 23.2m ($1.3m) for the purchase of feed for over 4,600 cattle, while reportedly 434 applications (worth EGP 96,630 or $5,368) are currently under review.
According to the report, by the end of 2017, the project will have funded the purchase of roughly
75,000 cattle, which are expected to double and reach a total of 150,000 animals by 2018.
On the other hand, Egypt continues to actively pursue foot-and-mouth disease (FMD) vaccination, with 3.274 million cattle vaccinated.
As part of Egypt’s plans to increase beef production, Al-Sisi confirmed in early 2017 that out of the EGP 100bn ($5.6bn) budgeted for herd expansion, around EGP 5bn ($281m) has now been spent on equipping cattle farms. To date, over 24,000 live cattle have been imported from Brazil and Uruguay. The Ministry of Agriculture and Land Reclamation announced that it is launching the project with a pilot production model in nine areas within the governorate of Beheira, starting with around 200,000 dairy and fattening cattle, the FSA report indicates.
Furthermore, the project will include a milk processing factory, as well as slaughter facilities. Given that most of the cattle will be imported, the project’s success hinges on the Egyptian pound strengthening.
Cattle Producers & Input Costs
In regard to input costs, the report cites that the Ministry of Supply and Internal Trade (MoSIT) confirmed, in July 2017, that it is resuming fixing annual indicative prices for grain (i.e. corn, wheat, and rice), reversing a 2013 decision allowing market forces to determine prices. The ministry’s decision was embraced by farmers who believe it will help control their animal feed prices.
Prior to 2013, the MoSIT fixed grain prices at EGP 1,200-1,300/tonne ($67-72/tonne).
Following the decision to let the market determine prices, the cost of grain increased in 2014 to reach EGP 1,700/tonne ($95/tonne), soaring to EGP 4,000/tonne ($223/tonne) by July 2017.
Egyptian beef consumption trends
The FAS forecasts that Egyptian beef consumption will reach 645,000 tonnes in 2018, up 35,000 tonnes from 2017’s estimate. The FAS revised in their report their earlier 2017 consumption estimates to 610,000 tonnes from the USDA’s official estimate of 660,000 tonnes, due to consumers reducing their purchases of beef in the wake of the Egyptian pound’s 2016 devaluation.
The report attributes the 2018 consumption increase to expanded beef supply, as well as the expectation of a drop in meat prices. Egyptian beef consumption is driven by the availability of affordable beef. Since the majority of Egyptians are low-income consumers, beef consumption is tied to lower cost, not consumer calculations premised on the recommended daily intake of protein.
Moreover, Egyptians prefer beef to other types of meat (i.e., poultry and lamb), and also prefer fresh over frozen beef for cultural reasons. Red meat consumption is comprised mainly of locally produced fresh meat, imported ready-for-slaughter cattle, imports of frozen buffalo meat from India, and frozen beef (primarily from Brazil). More affluent consumers view frozen imported beef as being an inferior product due to the fact that the bulk of frozen imported beef is low-quality cuts sold at government outlets at discounted prices.
According to the report, the Central Bank of Egypt’s decision to free float the Egyptian pound resulted in a significant increase in imported cattle and frozen beef prices, as well as imported feed costs.
Devaluation impacted beef consumption in 2017 and the ensuing price surge led to a consumption drop of
12.5% (87,000 tonnes). Following the devaluation, the price of live cows for slaughter rose to EGP 60/kilogram ($3.30) compared to EGP 40/kilogram ($2.20) in 2016. Similarly, live buffalo for slaughter currently registers at EGP 51/kilogram ($2.80) compared to 2016’s EGP 37/kilogram ($2.00).
The rise in live cattle prices is impacting Egyptian Muslim’s ability to sacrifice animals during the
Islamic Al-Adha holiday. On that occasion, Muslims normally sacrifice a domesticated animal, such as a young bull, camel, goat, or sheep. During 2016’s Al-Adha feast, live cattle was sold at EGP 7,000-12,000 ($391-670) a head, while in 2016 prices ranged between EGP 15,000-18,000 ($837-1,000).
Domestic beef currently sells at EGP 120-180/kilogram ($6.70-10.00). Before the 2016 devaluation, prices ranged between EGP 80-120/kilogram ($4.40-6.70). Sudanese chilled beef sells at EGP 90/kilogram ($5.00) compared to EGP 65/kilogram ($3.60) in 2016. Brazilian frozen beef is offered at EGP 60-70/kilogram ($3.30-4.10) compared to EGP 45/kilogram ($2.50) in 2016. Ukrainian and Spanish fresh beef has an average price of EGP 60/kilogram ($3.30).
The report forecasts that beef prices will fall in 2018 as the pound strengthens, as analysts foresee the pound strengthening to EGP 16.6-17.1 against the US dollar by December 2017. Speculators are betting that the exchange rate will become EGP 14-15 per dollar by 2018, which may generate a drop in beef prices and increase in beef consumption.
Egypt’s beef trade and imports
Following the political unrest in 2011, importers turned to the parallel market for their foreign exchange needs; the black market commanded a 30-40% premium over the official exchange rate. With the halving of the pound’s value, private importers are being pushed out of the market and government ministries such as the MoSIT, MALR, and the Ministry of Defence have now become Egypt’s largest importers of live cattle and frozen beef, the report indicates.
Furthermore, the report forecasts that total live cattle imports in 2018 will remain stable at about 250,000, with Sudan and Brazil being the biggest suppliers. Other suppliers include Spain, Germany, Ukraine, Hungry and the United States.
The majority of Egypt’s live cattle for immediate slaughter come from Africa (mainly Sudan, Ethiopia,
and Somalia). Reinvigorating relationships with the African continent’s polities is one of Cairo’s key foreign policy priorities. Egypt’s cattle diplomacy in 2015 led to the purchase of 800,000 live cattle valued at EGP 1.3bn ($166m) from Sudan over a period of three years.
On the other hand, US-origin live cattle is highly regarded among Egyptian importers and government officials. Holstein Association’s dairy cattle for milk production is Egypt’s preferred breed. However, US beef commands higher purchase and shipping costs compared to other source countries.
Consequently, Egypt has not imported any live US cattle since 2013. That year, Egypt imported 1,386 female dry cattle, compared to 3,135 pure-bred female breeding cattle in 2012.
Egyptian beef imports are forecasted to reach 280,000 tonnes in 2018, up 30,000 tonnes (12%) compared to 2017. The FAS is decreasing its 2017 import figure to 250,000 tonnes from the USDA’s official estimate of 300,000 tonnes due to the challenges importers are facing as a consequence of the 2016 devaluation.
The report attributes 2018’s import increase to a rebound in domestic consumption due to the anticipated drop in prices. “We foresee imports bridging the gap between production and consumption.
Brazil is expected to stay Egypt’s main supplier of frozen beef, while India will remain the country’s
sole supplier of frozen buffalo meat. Other frozen beef suppliers include Denmark, Australia, United
States, New Zealand, Ukraine, South Africa, Poland, and Romania.” the report states.
In 2016, Egypt’s beef imports from the United States registered only 353 tonnes of beef ($2.65m) compared to 1,006 tonnes ($5.8m) and 1,023 tonnes ($4.9m) in 2014 and 2015, respectively. Most US frozen beef exports to Egypt are high-quality beef cuts used primarily by the hotel and restaurant sectors. The report attributes the witnessed drop in US beef exports to Egypt to the decline in tourism combined with foreign exchange challenges since the 2011 revolution.
The report forecasts that with a stronger Egyptian pound in 2018 and the return of tourism, US
exports of frozen beef will recover. The CBE reports that tourism receipts tripled in the last three months of fiscal year (FY) 2016/17. Tourism revenue rose to $1.5bn in the fourth quarter, from $510m in the same period a year ago.
Moreover, Egypt is the largest market for US frozen beef liver and offal. In 2016, US exports accounted for 92,869 tonnes of frozen beef liver and offal ($99m).
On the other hand, Brazil is Egypt’s largest supplier of frozen beef. In 2016, Brazil exported 106,272 tonnes ($335m) of frozen beef compared to 85,345 tonnes ($297m) in 2015. Meanwhile, India is the sole supplier of frozen buffalo meat to Egypt, with 36,000 tonnes ($103m) of frozen buffalo exports in 2016, compared to 18,816 tonnes ($56.5m) in 2015.