In an effort to keep the tabs on consumer prices of rice, new regulations balancing supply to the local market and exports were issued last week, Mona El-Fiqi reports On 22 October, Minister of Trade and Industry Rachid Mohamed Rachid announced a host of amendments to regulations on rice exports, effective 1 December 2009. Under the new amendments, a total of 100,000 tonnes of rice will be exported every month. According to the new regulations, export licences will be issued through a closed envelope bidding process with the total amount exported per licence capped at 34,000 tonnes. The first bidding round is expected to be held within the coming few days. The amounts exported will be subject to review every month based on the balance between domestic supply, the available rice stock and amounts needed for the national subsidy programme. The new regulations also include reducing export fees levied on rice from LE2,000 to LE1,000 per tonne. The amendments were made to regulate a market in light of the existence of large rice stocks still available from the last harvest -- around 500,000 tonnes -- in addition to this year's crop. The government hopes the new regulations will help push up prices for farmers by LE800 and LE1,200 per tonne, while the increase in the price to the consumer is expected to be minimal. The decision comes after much debate over issues pertaining to rice exports, the securing of supply for local demand -- whether for Egyptian consumers or for the national subsidy programme -- and the cost versus selling price to farmers. "This was a very complicated equation to balance because we had several players involved with different demands," explained Rachid. "On the one hand, you have the farmers who already have rice stock from last year and a new crop from this year that they are unable to sell because the price they were receiving was lower than their production cost. You have the rice producers and the mills on the other hand who have stock that is building up and they are unable to sell domestically or export. You also have the consumer, who is most concerned with the supply in the domestic market and the price of rice," said Rachid. According to Rachid, a strategic decision has been made by the government as part of its agricultural policy to reduce the amount of rice planted in Egypt because of water supply issues. Rachid said these amendments are designed to take into account the concerns of all parties and to balance them. However, rice dealers have a different reaction. While the decision was welcomed by some experts, rice exporters expressed reservations on the new system. Abdel-Aziz El-Saltesi, chairman of the Rice Division at the Egyptian Federation of Industries, said that the decision is a positive step for farmers because it will help them recover their production costs. According to El-Saltesi, farmers used to sell rice at LE870 per tonne, which did not cover high fertiliser prices. One more positive result of the decision, according to El-Saltesi, is that export prices will also be raised to match international rice prices. However, according to El-Saltesi, the decision has resulted in an increase in the price of rice in the market from LE850 to LE1,200 per tonne. "In response to the government's decision, traders started immediately to collect large amounts of rice from farmers with the aim of controlling prices," said El-Saltesi. El-Saltesi explained that the rice export process was in need of regulation since Egyptian rice export volume rose from 300,000 tonnes in 1992 to 1.3 million tonnes in 2007, at a time when these amounts were needed to cover local consumption reaching 3.5 million tonnes annually. The Rice Division presented a memo to the prime minister welcoming the new decision and requesting that rules be set that would help stabilise rice prices for the benefit of consumers. Samir El-Naggar, a major rice exporter, agreed that the government should intervene to control rice trade in both local and international markets, but he blamed the government for not taking exporters' opinions into consideration before issuing the new regulations. "Exporters were not invited to share in the discussion with policymakers," El-Naggar said. He also criticised the government for changing its policies on a whim. "There should be a clear long-term policy in order to help exporters to have a vision for their business," said El-Naggar. He added that the new regulations are not clear enough to be understood easily. For example, the rules for bidding for rice exports should be published for exporters to become acquainted with them. Egypt currently produces an average of 4.5 million tonnes of rice per year. Last year, the Egyptian government announced that it aims to decrease the agricultural land allocated to rice to around 1.3 million feddans due to water constraints. In light of this policy, which coincided with increases in retail prices of rice in the domestic market, the Ministry of Trade and Industry banned rice exports altogether in 2008. This decision was later amended in 2009 to limit rice exports by those producers supplying rice to the national subsidy programme. Under the new amendment, the policy of limited exports will be upheld. However, there will no longer be a correlation between exporting and supplying the national subsidy programme, which has 65 million beneficiaries.
