Egypt’s Wheat Farmers Hobbled by Fuel Shortages as Silos Run Low
Sucking tobacco smoke through a water pipe shared with three fellow farmers during a midday tea break, Osama Abdel-Ghani surveys the ripening wheat that Egypt is counting on to help feed its people.
A water pump, idled by lack of fuel, juts from his field on the outskirts of Giza, west of Cairo. Abdel-Ghani expects lower yields from his 4-feddan (4.2-acre) plot this year amid a shortage of fertilizer and diesel to run irrigation equipment, and says production costs have doubled in two years.
“Everything is going from bad to worse,” said the 48-year-old farmer. “After this year, I plan to plant vegetables. Much less painful than wheat.”
Abdel-Ghani’s challenges reflect those faced across the nation of 84 million, 27 months after former President Hosni Mubarak was ousted in the region’s Arab Spring revolts. His successor, Mohamed Mursi, is counting on the wheat to ensure adequate supplies of subsidized bread while curbing food imports that are draining dwindling foreign currency reserves.
Shortages of fuel and fertilizer are undermining Mursi’s strategy for Africa’s biggest wheat grower and consumer and there’s mounting concern that farmers don’t have enough of either to deliver the grain needed to replenish silos. Stockpiles were down to 64 days of supply by April 28, less than during the 2008 global food crisis that triggered riots.
“Egypt grows more tense by the week,” said Daniel Wagner, chief executive officer of Country Risk Solutions, a Danbury, Connecticut-based risk adviser. “It’s about whether basic needs are going to be met.”
The country, which last tendered for wheat on Feb. 20, will curb imports by 27 percent to 8.5 million metric tons this year, still enough to make it the world’s biggest buyer, the U.S. Department of Agriculture estimates. The domestic crop was about 8.5 million tons in 2012, compared with consumption of 18.4 million tons, USDA data show.
Foreign currency reserves plunged more than 60 percent in the past two years, reaching $13.4 billion by the end of March. The Egyptian pound slumped 8.5 percent against the dollar since the end of December, increasing import costs of dollar-denominated fuel and food.
Egypt bought 996,000 tons of local wheat so far this season, compared with 209,000 tons in the same period last year, Supply Minister Bassem Oda said today at a news conference. The country will keep buying wheat from local farmers until early July, Nomani Nomani, an adviser to Oda, said by phone from Cairo. The state is also making more storage available and increasing diesel supplies to farmers.
“The government is doing what it can and so are the farmers,” said Nomani, who until March was the head of the General Authority for Supply Commodities, the government body managing the grain import tenders.
Wheat provides about a third of the country’s daily calorie intake, according to the United Nations’ Food & Agriculture Organization. Per-capita consumption of about 182 kilograms (401 pounds) a year is more than double the U.S., said Monika Tothova, an FAO economist in Rome.
The government’s subsidized loaves of bread costing 5 piasters (1 cent) are a lifeline. In Egypt, 13 percent of people are unemployed and gross domestic product averages $6,600 per person, placing the country at 140th richest out of 229 nations in the CIA’s World Factbook.
Shortages and inflation have provoked riots before, including in 2008 when wheat reached a record $13.495 a bushel, or about 85 percent more than now. Global food costs tracked by the UN rose to an all-time high that year and the U.S. State Department estimates surging prices triggered more than 60 riots worldwide from 2007 to 2009.
Violence has been linked to food prices for decades in Egypt. Attempts in 1977 to end subsidies on flour and other basic foodstuffs prompted riots across the country that left more than 80 dead before the government of then-President Anwar Sadat scrapped the new policies.
Egypt’s population has more than doubled since then, and may expand by another 15 million in the next decade, U.S. Census Bureau estimates show. That would imply Egypt needs an extra 2.7 million tons of wheat a year by 2022. The country increased its domestic crop fivefold since 1977.
The FAO’s index of world food prices dropped from an all-time high of 237.92 points in February 2011 to 215.5 points last month. That contrasts with an 80 percent jump in the two years leading up to the then-record 224.13 in June 2008.
Talks with the International Monetary Fund for a $4.8 billion loan ended without an agreement after the government failed to tackle economic reforms including a cut in energy subsidies.
“In a political context where street protests remain the accepted conduit for voicing criticism, riots related to the price of bread are a distinct possibility,” said Oliver Coleman, an analyst for the Middle East and North Africa at Maplecroft, a risk analysis company in Bath, England.
The government agreed to import about 3.4 million tons of wheat so far this season, compared with 5.3 million tons at the same time a year ago and the lowest since at least 2006-07, according to data compiled by Bloomberg based on published tender results.
Egypt’s lack of diesel may disrupt harvesting and transport of grain to flour mills, risking a shortage in June and July when stocks will run low, the USDA’s Foreign Agricultural Service said in a report last month.
“There is no diesel, so how do you expect the machines to work?” said Mohamed Abdel Mo’men, who grows wheat in the Nile delta to the north of Cairo. Fuel shortages will make it harder to transport wheat to the nearest government collection point, 5 kilometers (3.1 miles) away, he said.
Harvesting is under way and the government has made few efforts to transport or store grain, according to Mohamed Abdel Qader, the head of Egypt’s Farmers Syndicate, a lobby group created in 2011.
The delays are increasing the risk to crops from insects and birds and 25 percent of Egypt’s wheat may be damaged, he said. The country doesn’t have enough silos to store all its supplies.
“The government doesn’t know how to handle the diesel shortage,” Abdel Qader said. “Securing irrigation water, fertilizer, diesel and transportation shouldn’t be the farmers’ problem. It’s the government’s job to secure production tools for such a strategic good.”
The country plans to buy 4.5 million tons of wheat from local farmers this year for the subsidized bread program, Oda said last month. A draft budget for 2013-14 obtained by Bloomberg sets aside 7.21 billion Egyptian pounds ($1.04 billion) to buy 3.7 million tons of local wheat.
The target “appears unrealistic,” with 3 million to 3.2 million tons more likely, according to the USDA’s FAS. The harvest usually ends this month, according to the UN’s agriculture body.
Egypt’s farmers typically irrigate wheat four to six times in a season and apply nitrogen fertilizer to get “extremely high” yields, said Hans-Joachim Braun, head of the global wheat program at El Batan, Mexico-based grain researcher Cimmyt.
Diesel for irrigation pumps and other machinery has been almost impossible to obtain this season and farmer Abdel-Ghani said he has paid more than double the official price for fertilizer because of a lack of subsidized supply.
Wheat planting for this year’s harvest increased to 3.4 million feddans from about 3 million feddans previously, according to Reda Aggag, an adviser to the supply minister. The country forecasts a crop of as much as 9.5 million tons.
The average wheat yield of about 6.5 tons per hectare (2.47 acres) multiplied by the government’s planting estimate would imply a 9.3 million-ton crop, said Tothova at the FAO.
“From an agronomy and climate point of view, it could happen, this big harvest,” Tothova said. “The question is whether they’ll manage to harvest it, then the question is how you’ll get it to market.”