Egypt has resolved to diversify its wheat imports. Sherine Nasr reports Importing American wheat has always been an issue of controversy amongst the majority of Egyptians. Many are strongly convinced that it is impossible to break free from the influence of American policy if Egypt continues to rely entirely on the US for such a strategic commodity and is incapable of producing it domestically. However, Egypt, the world's second largest wheat importer, buys wheat just like any other country. Purchases are made in international wheat bourses, while price and quality determine whose wheat to buy. Therefore, over the past couple of years there has been a relative decline in Egyptian imports of US wheat. Russia, followed by Argentina, offered more competitive prices than the US, allowing Egypt to turn towards them as alternative suppliers. "Five years ago, Egypt was the second, if not the largest importer of US wheat. Yet over the past two years, wheat imports have declined and Egypt has now become the fifth largest importer of wheat from the US," said Dick Prior, regional vice president of US Wheat Associates for the Middle East and East Africa. Prior added that last year, Egypt imported two million metric tonnes of US wheat compared to four million metric tonnes three years earlier. The US Wheat Associates is a private, non- profit organisation which represents American wheat farmers and is supported financially by 19 state commissions. The organisation has a regional office in Cairo in addition to 17 other offices around the world. The Cairo office is the headquarters for 26 other countries in the region including both Ethiopia and Turkey. Because wheat is such a strategic commodity, Egypt has always been keen to diversify its supply. Last week, for example, Egypt and the UK made an agreement by virtue of which Britain will export wheat and beans to Egypt in return for Egyptian vegetables, rice, fertilisers and textiles. While the deal is considered a big success for UK growers who will now profit from the lucrative Egyptian market, for Egypt it is a chance to establish long-term trade relations with important partners such as the UK. It is the first time for the Ministry of Supply and Internal Trade to put UK milling wheat for bread and biscuits on its official list of potential suppliers. "The UK wheat is compatible with the demands of the Egyptian market in all ways except for the moisture factor," Minister Hassan Khedr was quoted as saying recently. The British are also currently negotiating to build a mill located within any of Egypt's duty free zones to grind British wheat. Khedr added that other countries also provide Egypt with the facilities to overcome its reliance on imported wheat. France, for example, offers 25,000 tonnes of wheat as a grant while Australia is studying the possibility of building a 150,000 tonne grain silo at the Sokhna Port. It is worth noting that Egypt produces domestically nearly half of its needs for wheat every year. Yet, statistics show that Egypt's wheat imports reached some nine million metric tonnes last year. The most recent legislation for food subsidies decided by the government mounted to LE11 billion, LE7.8 billion of which was directed to subsidise baladi bread. The price of international wheat is determined according to multiple factors. Over the past two years, for example, both Russia and Argentina were able to heat up competition in the international wheat market through producing good quality wheat at very reasonable prices. "If Australia has a good crop this year, it may become very aggressive as well," commented Prior. Ocean freight is an equally important factor to affect the international wheat price. "In 2003, flour prices in Egypt went up simply because ocean freight went from $15 a tonne to $55 which had a direct impact on flour prices in Egypt," said Prior, who added that the exchange rate also affects the price of wheat exported to Egypt. Over the past 25 years, American wheat exports to Egypt have undergone a series of changes. During the 1980s, the US granted Egypt loans to buy US wheat. But after the Gulf War, Egypt had to procure its own cash. "During the past 25 years, the US has contributed some $230 million as investment in the wheat industry in Egypt," Prior said. The Safaga silo was established at a cost of $80 million, the Alexandria and the Shoubra silos for $60 million each, in addition to other investments in the field of education for milling and baking. Moreover, a $200 million line of credit was offered to the region, including Egypt, as a commercial credit facility guaranteed by the US Department of Agriculture. "By virtue of the credit, short term, low-interest loans can be offered to Egyptian private sector buyers," said Prior. Unfortunately, Egypt has not used this line of credit well. "The fluctuation of the exchange rate has scared people off," noted Prior. However, the Egyptian government is now studying the possibility of using the credit as a means to fulfil its needs.
