It is estimated that Egypt, the world's largest wheat importer, purchased 13 million tons of wheat last year. The Egyptian government, which makes large-volume purchases to increase its wheat stocks, also aims to increase its strategic storage capacity.
Milling is a critical sector in Egypt as it is the world's largest wheat importer and also a major wheat producer. Wheat is widely used in the production of staple foods such as flour, bread and pasta in the Egyptian market in flour mills and pasta factories to feed more than 100 million Egyptians. According to the statistics shared by the Food and Agriculture Organization of the United Nations (FAO), Egypt is the country most dependent on the protein supply from wheat, and this figure reaches 35 grams per person per day.
Correspondingly, wheat consumption in Egypt is very large and is increasing every year. Wheat consumption, which was 20.8 million tons in 2020, is estimated to increase to 21.1 million tons last year. Egypt, a major wheat consumer, has experienced a slight increase in domestic wheat production in recent years. However, the production figures are still not very satisfactory. According to the Egyptian Ministry of Supply, domestic wheat production reached 9 million tons last year which was 8.9 million tons the year before. The government allocated £17 billion last year to buy domestic wheat from farmers. According to the ministry, Egypt has enough wheat to be self-sufficient for the next 6 months. The government's efforts in this area to increase domestic production are welcomed by the industry.
It is certain that in a country the size of Egypt, which is quite dependent on wheat products, domestic production cannot be sufficient, resulting in huge investments in wheat imports. It is estimated that Egypt's wheat import for 2021 reached 13 million tons. In 2020, this figure was 12.5 million tons. Russia is the main wheat supplier of Egypt. Another top client for Russia is Turkey. Turkey and Egypt generally race to the top in Russia's wheat export.
In addition to imports made directly by the private sector, wheat imported by Egypt is purchased through tenders opened by the General Authority for Supply Commodities (GASC) that work under the Ministry of Supply and Internal Trade. Wheat is imported from different countries, especially Russia, Romania and Ukraine.
On the other hand, while the Egyptian government is trying to reduce imports by regaining agricultural lands and increasing domestic production, it also plans to allocate an additional 4 million hectares for wheat cultivation in the next 3 years.
The government is also increasing strategic storage capacity with the National Project of Grain Silos. The project aims to build new silos with a storage capacity of 1.5 million tons in 17 cities across Egypt. As a result, the total storage capacity of the silos in Egypt will reach approximately 3.6 million tons.
BREAD PRICE IN EGYPT IS FIXED FOR 30 YEARS
In Egypt, wheat is distributed between flour mills and pasta factories. Most of the wheat goes to flour mills and is used to produce different types of flour, mainly for making the subsidized Baladi bread. There are more than 410 flour mills in Egypt.
Bread is very important in Egyptian cuisine. The Egyptians use the word "Aish" for bread, which means "life". In the country, 270 million pieces of bread are produced daily in more than 30 thousand bakeries. The government is making great efforts to subsidize bread. The annual cost of the bread subsidy to the government is 45 billion Egyptian pounds. More than 70 million Egyptians hold smart cards which enable them to buy five loaves of bread daily.
All these procedures are put into practice to ensure that Baladi bread prices remain unchanged. Indeed, bread prices in Egypt have remained unchanged for the past 30 years, making the price of this bread the cheapest in the world. Subsidized bread sells for 5 Egyptian cents ($0.0032) per loaf. However, due to the high cost of the current program, the government is expected to change its procedure for bread subsidies. According to the Egyptian Grain Industry, the amount of subsidized flour used for Baladi bread amounts to 8-9 million tons per year.
COVID-19 EFFECT ON EGYPTIAN GRAIN MARKET
Grain prices are quite high around the world. The impact of Covid-19 on the grain market has been deep. Now prices are higher compared to the same period last year. The pandemic has caused strong fluctuations and increases in price due to restrictions and shipping restraints. Therefore, in our opinion, due to the increase in wheat prices, a step by Egypt towards reducing the subsidy would be comprehensible.
In addition, reducing the bread subsidy will increase the demand for unsubsidized bread produced using private sector flour, which will create new opportunities for private flour mills in Egypt and investments in the Egyptian milling industry. This makes Egypt one of the most promising markets in this field.
The bakery industry in Egypt is enormous and growing rapidly year by year. Despite the great competition in the market, Egypt is one of the promising markets of the Middle East in terms of consumption and growth due to many reasons such as its location and rapid population growth. The demand for wheat flour in the country is very high.