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Jul 07 2013

Egypt remains world's largest wheat importer

JEDDAH - Egypt remains the world's largest wheat importer, and high global prices are feeding into domestic prices, even if minimally, Fast Market Research said Saturday.

Even though imports have been slightly lower this year, still the country's import needs will only get larger in the coming years, it said. It noted that the lifting of the three-year-old ban on rice exports as providing a boost to the local industry. The sugar industry is benefitting from a tight local market and higher domestic prices than global while the cotton industry should be helped by the recent recovery in prices. The livestock and dairy industries are likely to recover soon from the recent foot-and-mouth disease outbreak, which had a milder impact than expected.

The study said wheat production will increase 13.4 percent to 9.5 million tons growth by 2016/17. This will come largely on the back of government efforts to increase area planted and yields in the coming years.

Meanwhile, cotton consumption will rise 12.3 percent to 633,000 tons in the covered period. The cotton industry is set to recover slightly in the medium term, as domestic output increases and cotton prices remain below previous peak in the coming years.

Poultry production, too, would jump 18.3 percent to 986,600 tons in the said period. This will come from improvements in productivity as well better integration of livestock producers and therefore gains in margins. The study forecast for a moderation in grain prices in the medium term would help.

In the wake of the Egyptian government's decision to reduce imports to save money, the country's 2013/14 wheat crop (due to be harvested in July) takes on increasing importance. So far, prospects for the crop look favorable, and we continue to forecast mild production growth in 2013/14. This, combined with the study's view that wheat prices will moderate in H213, is likely to help keep the country's food price inflation only slightly above five-year lows at around 8 percent. If production problems occur, the country will be forced to increase imports, which could be comparatively cheap if the Eastern European grain crop meets production expectations.

The report further said even though generally better supply of rice on the domestic market is expected in the coming season, prices of paddy rice could remain artificially elevated as traders fear to sell to GASC because of rising currency risks. Prices of paddy rice in the country recently rose by 13-15 percent to reach EGP2050/ton, compared to EGP1800/ton some months ago. This is because the latest tenders for rice by the Egyptian GASC have failed, with traders reluctant to sell their rice in a context of continually declining value for the Egyptian pound. In fact, traders often get paid at today's price, while they purchase and deliver the price two or three months later, making a loss linked to the currency risks.

The study forecast that sugar production in Egypt will increase only slightly to 2.1 million tons as area planted is likely to be kept about constant.

Local industry sources are not expecting any increase in the area dedicated to cane in the coming year, as the government is encouraging farmers to grow beet in order to conserve water resources. Area dedicated to beet is expected to increase only slightly in 2012/13, as the crop is a relatively new crop in the country and expansion will take time. The increase in refined sugar production will come from better sugar cane utilization for centrifugal sugar rather than for juices or direct consumption.

© The Saudi Gazette 2013

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