Ahned Mostafa ✍️
Egypt and the wheat crisis and replacing part of it with corn:
Egypt has put plans in place to reduce wheat imports and cut spending on subsidized bread by adding corn or sorghum as ingredients. These proposals presented to the government could save millions of dollars, but they will face opposition from bakery and mill owners who may incur financial losses and argue that the quality of bread will be affected. Egypt is suffering from high debt, a shortage of foreign currency, and ongoing inflation. The government acknowledges that the bread subsidy program is a significant burden on the budget.
The latest plan from the Ministry of Supply, presented to bakery and mill owners at the end of September, is to mix corn flour with wheat flour at a ratio of 1:4, starting in April 2025, which would save about one million metric tons of wheat. The government canceled a previous plan to increase the extraction rate of flour used in subsidized bread from wheat, after resistance from industry lobbies and importers. Egypt has previously proposed plans to replace wheat in its quest for greater self-sufficiency.
Corn flour could allow for significant savings in hard currency if locally grown corn is used, but not if the corn is imported. At best, the government could save about $35-41 per ton.
The Ministry of Supply in Egypt needs about 8.25 million tons of wheat annually to make subsidized bread available to more than 70 million Egyptians with food subsidies cards, according to the 2024-25 budget. About 3.5 million tons are sourced locally, and the rest is imported. The General Authority for Supply Commodities (GASC) told Reuters on Friday that the subsidized bread system was “stable.”
Egypt is one of the largest wheat importers in the world, spending about 104 billion Egyptian pounds (equivalent to $2.1 billion) annually on wheat imports, most of which come from Russia. Last August, President Abdel Fattah el-Sisi ordered the largest wheat tender in the country’s history in an attempt to secure cheap prices after a decline in the global index. Consequently, the country explored alternatives including bank loans to purchase wheat and direct deals with traders.
Additionally, the Ministry of Supply proposed using cheaper corn flour in bread production, an idea that has not been completely abandoned. However, bakeries oppose this plan, arguing that coarser flour containing more corn and bran requires longer baking times, which will increase labor costs. Mills also oppose it because they charge based on the amount of wheat they process, which will decrease.
Proposed solutions for Egypt
One effective strategy is to enhance local wheat production, which can be significantly improved by investing in modern agricultural technologies such as precision farming and genetically modified crops. Inefficient water management systems, such as drip irrigation and water-saving techniques, can reduce water waste and increase the land’s capacity to support wheat cultivation. The World Bank estimates that effective water management can boost agricultural productivity by up to 50%.
Government policies play a pivotal role in supporting the agricultural sector by providing financial support for seeds, fertilizers, and machinery to reduce costs for farmers and encourage larger production. Targeted financial aid and access to credit can enable farmers to invest in their land and improve their yields. Diversifying wheat import sources in Egypt, establishing trade agreements with a broader range of countries, and investing in agricultural research and development are also essential.
Sustainable agricultural practices, such as crop rotation, organic farming, and integrated pest management, can contribute to soil and environmental health in the long term. The European Commission indicates that sustainable farming practices can increase farm profitability by up to 20% while reducing environmental impact.
Education and training programs for farmers are crucial, as many small farmers in Egypt lack access to the latest information and technologies. The government can empower farmers to adopt modern practices and improve their yields. Upgrading storage facilities and transportation networks can reduce post-harvest losses and ensure that locally produced wheat reaches the market efficiently.
Finally, partnerships between the public and private sectors can enhance innovation and investment in the agricultural sector. Private companies can bring capital, technology, and expertise, while the government can provide regulatory support and incentives. By implementing these strategies, Egypt can reduce its dependence on wheat imports, alleviate financial burdens, and ensure a more resilient and sustainable food system for its people.
Egypt should explore innovative solutions to reduce its reliance on foreign wheat. One potential solution for Egypt is to access preferential trade agreements, importing wheat at more favorable prices through BRICS membership, as well as acquiring advanced agricultural technologies. Egypt can attract significant foreign direct investment in its agricultural sector, boosting productivity and supporting local farmers. Joining BRICS can also provide political and diplomatic advantages, such as improving trade negotiations and reducing tariffs. However, Egypt must also focus on local reforms and policies that support agricultural development.
The situation in Algeria differs from that in Egypt because Algeria is a debt-free country
Algeria has banned French companies from participating in a tender for wheat imports due to renewed diplomatic tensions between Algeria and Paris. The Algerian government agency for grains, OAIC, held a limited tender for technical reasons related to industrial needs, treating all suppliers fairly regardless of the source of the wheat. Algeria is one of the largest wheat buyers in the world, having been surpassed by Russia in the past two years with the flow of Black Sea supplies into its massive import market. The restrictions imposed on France reflect a diplomatic dispute from three years ago that led to France being sidelined from wheat tenders in its former colony for several months.
Algeria held one of its regular tenders on Tuesday, where it is estimated that OAIC purchased more than 500,000 metric tons. Tenders are held on a source selection basis, where the seller can choose the source of the grains from a range of approved sources, including French wheat. However, six sources familiar with the matter said that French companies did not receive an invitation to participate this time, while non-French companies that participated were asked not to propose French wheat as a supply option.
Algeria is retaliating against the French administration, which has shown bias towards Morocco, by acknowledging that Western Sahara in West Africa is under Moroccan sovereignty despite Algeria’s claims for autonomy and sovereignty over this region to avoid any regional and international disputes.
Algeria’s position is strengthened by the fact that it is one of the largest gas exporters to Western Europe, especially France, and that Algeria, according to international financial reports from the International Monetary Fund, is one of the only Arab countries not burdened by debt, which gives it sovereignty in its economic and political decisions.
The French Ministry of Foreign Trade declined to comment, referring the matter to the Ministry of Agriculture, which did not immediately respond to requests for comment. French wheat was not seen as competitive for winning business in this week’s tender due to a weak harvest and prices much higher than those in Russia.
Additionally, Algeria is a strong candidate for acceptance into the BRICS Plus group, as it also leans more towards the East and new global powers like China and Russia. Its acceptance may be announced during the upcoming BRICS summit in a week, which will be held in Kazan, Russia, from October 22-24, where Russia is the current president of this session after South Africa in 2023.
