Required Report - public distribution

**Date:** 10/18/2004

**GAIN Report Number:** EG4023

EG4023

**Egypt**

**Dairy and Products**

**Annual**

**2004**

**Approved by:**

![](media/image1.wmf)Asif J. Chaudhry

US Embassy

**Prepared by:**

Fred Giles & Sherif Ibrahim

**Report Highlights:**

Egyptian fluid milk production in 2003 remained unchanged from 2002
levels. On September 8,2004, the government of Egypt reduced tariff
rates for imported cheese from 30 percent to 22 percent.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Unscheduled Report

Cairo \[EG1\]

\[EG\]

Table of Contents

[PSD Table 3](#psd-table)

[Production 3](#production)

[Cheese 4](#cheese)

[Production 4](#production-1)

[Consumption 5](#consumption)

[Price 5](#price)

[Trade 5](#trade)

[Tariffs 6](#tariffs)

[Marketing Opportunities for U.S. Cheese Exports
6](#marketing-opportunities-for-u.s.-cheese-exports)

[Import Trade Matrix 7](#import-trade-matrix)

[Butter 8](#butter)

[Production 8](#production-2)

[Consumption 8](#consumption-1)

# PSD Table

  --------------------- ----------- ------------ -------- ------------ -------- ------------
  **PSD Table**                                                                 

  **Country:**          **Egypt**                                               

  **Commodity:**        **Dairy,                                                
                        Milk,                                                   
                        Fluid**                                                 

                                    **2003**              **2004**              **2005**

                        Old         New          Old      New          Old      New

  **Calendar Year                   **Jan-03**            **Jan-04**            **Jan-05**
  Begin**                                                                       

  Cows In Milk          1620        1610         1620     1615         0        1617

  Cows Milk Production  1690        1680         1690     1675         0        1687

  Other Milk Production 2510        2120         2310     2125         0        2213

  TOTAL Production      4200        3800         4000     3800         0        3900

  Intra EC Imports      0           0            0        0            0        0

  Other Imports         0           0            0        0            0        0

  TOTAL Imports         0           0            0        0            0        0

  **TOTAL SUPPLY**      4200        **3800**     4000     **3800**     0        **3900**

  Intra EC Exports      0           0            0        0            0        0

  Other Exports         0           0            0        0            0        0

  TOTAL Exports         0           0            0        0            0        0

  Fluid Use Dom.        1700        1629         1700     1634         0        1677
  Consum.                                                                       

  Factory Use Consum.   2100        1800         2100     1866         0        1923

  Feed Use Dom. Consum. 400         371          200      300          0        300

  TOTAL Dom.            4200        3800         4000     3800         0        3900
  Consumption                                                                   

  **TOTAL               4200        **3800**     4000     **3800**     0        **3900**
  DISTRIBUTION**                                                                

  Calendar Yr. Imp.     0                        0        0            0        0
  from U.S.                                                                     

  Calendar Yr. Exp. to  0           0            0        0            0        0
  U.S.                                                                          
  --------------------- ----------- ------------ -------- ------------ -------- ------------

# Production

Total Egyptian fluid milk production in 2003 is estimated at 3.8 million
MT, practically unchanged from 2002 levels. Stagnation of production is
mainly due to the Ministry of Agriculture (MOA) Decree \# 1355/1998,
which requires that imported cattle must be from a country or area
declared as Unexotic Bovine Leukosis (EBL) free. Since the United States
is not declared as EBL-free, importation of U.S. dairy cattle into Egypt
in 2003 was effectively banned. However, as a result of joint efforts
between U.S. industry officials, importers, FAS Cairo, and APHIS, the
Egyptian government decided to allow the importation of breeding cattle
coming from bio-secured farms under the supervision of Egyptian
veterinary authorities. To date, no dairy cattle imports from the United
States have taken place; cost constraints are a major impediment.
Egyptian dairy farmers continue to favor U.S. dairy cattle for their
higher milk production (27 kg/day in their first lactation) compared
with 16 kg/day for cattle from other sources. In addition to EBL, the
single case of BSE found in the United States has made importation of
U.S. dairy cattle more difficult. As a result, fluid milk prices are
currently at LE 1.75 (for 3% milk fat) and could reach LE 1.85 after
adding quality premiums such as fat content. This is compared to LE 1.40
during the same period last year. Prices are expected to remain at or
near the current levels.

## Cheese

  --------------------- ----------- ------------ -------- ------------ -------- ------------
  **PSD Table**                                                                 

  **Country:**          **Egypt**                                               

  **Commodity:**        **Dairy,                                                
                        Cheese**                                                

                                    **2003**              **2004**              **2005**

                        Old         New          Old      New          Old      New

  **Calendar Year                   **Jan-03**            **Jan-04**            **Jan-05**
  Begin**                                                                       

  Beginning Stocks      0           0            0        0            0        0

  Production            450         450          430      455          0        457

  Intra EC Imports      0           0            0        0            0        0

  Other Imports         12          9            8        10           0        11

  TOTAL Imports         12          9            8        10           0        11

  **TOTAL SUPPLY**      462         **459**      438      **465**      0        **468**

  Intra EC Exports      0           0            0        0            0        0

  Other Exports         4           5            4        5            0        6

  TOTAL Exports         4           5            4        5            0        6

  Human Dom.            458         454          434      460          0        462
  Consumption                                                                   

  Other Use, Losses     0           0            0        0            0        0

  Total Dom.            458         454          434      460          0        462
  Consumption                                                                   

  TOTAL Use             462         459          438      465          0        468

  Ending Stocks         0           0            0        0            0        0

  **TOTAL               462         **459**      438      **465**      0        **468**
  DISTRIBUTION**                                                                

  Calendar Yr. Imp.     0           0            0        0            0        0
  from U.S.                                                                     

  Calendar Yr. Exp. to  0           0            0        0            0        0
  U.S.                                                                          
  --------------------- ----------- ------------ -------- ------------ -------- ------------

# Production

Between 60 and 65 percent of Egypt's total milk production, as well as
most imports of non-fat dry milk, (NFDM) is utilized in commercial
cheese production while the rest is divided between fresh milk
consumption, on farm cheese manufacturing and the production of UHT
milk. The most important type of cheese produced in Egypt is feta. There
are two types of feta cheese which differ depending on the raw materials
used in production. The first type is an inexpensive white cheese, which
is produced from imported NFDM and vegetable oil (palm oil). The second
category is a more expensive white cheese which is produced from fresh
milk. In 2003, feta cheese production, both commercial and homemade,
represented about 75 percent of the cheese produced and consumed in
Egypt. Egypt's total annual production of feta cheese in 2003 is
estimated at about 355,000 MT, 80 percent of which is produced from
unpasteurized milk by small unlicensed factories (about 5000 factories).
This is done despite an existing government standard (yet to be
enforced) which prohibits the production of feta cheese from
unpasteurized milk. The remaining balance of production is spread among
hard romano (60,000 MT), processed cheese (30,000 MT), a small but
growing production of mozzarella cheese, and very small amounts of blue
cheese and cheddar cheese. Total cheese production in 2004 is expected
to increase slightly over the 2003 level due to the expected increase in
both nonfat dry milk and whey imports. Most of this increase is expected
to occur in the production of feta cheese since its production relies
more heavily on these products.

Under the current economic reform policy, the government of Egypt
continues to offer for sale the only remaining public sector dairy
company (Misr Dairy which has 14 small plants) to private sector buyers.
Only one factory in Alexandria has been sold to a private sector
investor. According to Ministry of Industry officials, only three
factories out of the 14 are currently operating.

## Consumption

##  

Cheese is an important part of the Egyptian diet and many people eat
cheese at least with one meal a day. Most cheese is consumed either
directly or with bread. Annual per capita consumption of cheese is
estimated at around 6.5 kilograms. Feta cheese is both the most popular
and least expensive type of cheese available. Egyptians also are fond of
Romano and processed cheese. In 2003, imports of fancy cheeses such as
parmasan, camembert and brie are estimated at about 340 MT. Consumption
of cheddar cheese and mozzarella cheese (both natural and processed) is
rising due to the increased number of fast food (pizza and hamburger)
restaurants.

## 

# Price

The average wholesale prices for feta cheese ranged between LE 8‑12 per
kg in 2003 (depending on the type), and the retail prices varied between
LE 12 and LE 18 per kg (depending on the type). The wholesale price of
locally produced Romano cheese ranged between LE 13 to 18 per kg. It
retailed for LE 18 to 23 per kg. Imported cheddar cheese prices
currently range between \$2,500 and \$2,750 per MT C&F compared to
\$2,400 and \$2,500 per MT during 2003. The current price of imported
fancy cheese from Europe varies between \$5,000 and \$12,000 per MT C&F,
depending on the type of cheese. Gouda and edam cheeses are currently
being imported at \$3,470 and \$3,590 per MT CIF, respectively, while
retail prices range approximately between LE 25 and 26 per Kg,
respectively. Imported fancy cheese such as old amsterdam, parmesan and
camembert sell at between LE 90 and LE 115 per kg at the retail level.

## Trade 

The private sector is responsible for virtually all of Egypt's cheese
imports. Netherlands, Australia, Poland and New Zealand continue to be
by far, the major cheese supplier to the Egyptian market. Import demand
is generated largely by the more affluent segments of the population,
the tourism sector, hotels and restaurants, while demand for other
imports such as cheddar cheese is generated by growing domestic
processed cheese manufacturers. According to Egyptian import statistics,
cheese imports in 2003 are estimated at 9,232 MT compared to 9,000 MT in
2002. Egypt's total cheese exports in 2003 are estimated at about 5,000
MT, nearly the same as 2002. Most of Egypt's cheese exports consist of
feta cheese.

The European Union (EU) is the major fancy cheese supplier to the
Egyptian market. Cheese imports from the EUare expected to slightly
increase in both 2004 and 2005 due to the tariff reductions on imported
cheese.

The EU-Egyptian Partnership Agreement which was signed in June 2001 and
went into effect in June 2004, offers several important tariff
concessions for European dairy suppliers. However, European cheese
exporters are not expected to gain much from the agreement. According to
the agreement (Annex to protocol 2), Egypt will only allow a 2,000 MT
tariff rate quota (TRQ) at 50 percent of the basic tariff for cheese and
curd products from the EU. The following types of cheese products will
be included in this TRQ:

04061090 Fresh cheese in packages over 20 kg

04062090 Grated or powdered cheese over 20 kg

04063090 Processed cheese over 20 kg

04064090 Blue veined cheese over 20 kg

04069090 Other cheese over 20 kg

# Tariffs

On September 8, 2004, the government of Egypt reduced tariff rates for
imported cheese. All cheeses packaged under twenty kilograms are now
subjected to a 22 percent tariff compared to a 30 percent tariff before
the reduction. All cheeses, packaged over twenty kilograms are subjected
to a flat 12 percent tariff. It usually takes three weeks for imported
cheese to be released from port by Egyptian import authorities. A great
deal of that time is taken to review certifications required by the
Ministries of Health, Agriculture, and Economy & Trade. The shelf‑life
requirement for imported cheese is between 6 months and one year
depending on the type of product.

## Marketing Opportunities for U.S. Cheese Exports

The primary suppliers of cheese to the Egyptian market are Netherlands,
New Zealand, Australia and the European Union. Opportunities for U.S.
cheese exports to Egypt exist, but they are limited due to lack of price
competitiveness, especially when confronted with the EU subsidy program.
Although price is an important factor for cheese importers, there is a
growing segment of consumers where quality comes before price
considerations when buying cheese. The average Egyptian consumer is not
aware of the different types of cheese available from the United States.
However, the availability of the DEIP program for U.S. cheddar cheese
could be a very significant factor in expanding U.S. cheese exports
(particularly cheddar cheese for manufacturing) in the Egyptian market.

# Import Trade Matrix

  --------------------------- ----------- ------------------- --------------
  **Import Trade Matrix**                                     

  **Country:**                **Egypt**   Units:              MT

  **Commodity:**              **Dairy,                        
                              Cheese**                        

  **Time period:**            **CY**                          

  **Imports for**             **2002**                        **2003**

  U.S.                        65          U.S.                148

  Others                                  Others              

  Netherlands                 4,050       Netherland          3,199

  Australia                   1,923       Australia           1,199

  Newzealand                  1,014       Poland              582

                                          Newzealand          517

                                          Denmark             359

                                          France              146

                                                               

                                                               

                                                               

                                                               

  **Total for Others**        6987                            6002

  **Others not listed**       1,948                           3,082

  **Grand Total**             9000                            9232
  --------------------------- ----------- ------------------- --------------

## Butter

  --------------------- ----------- ------------ -------- ------------ -------- ------------
  **PSD Table**                                                                 

  **Country:**          **Egypt**                                               

  **Commodity:**        **Dairy,                                                
                        Butter**                                                

                                    **2003**              **2004**              **2005**

                        Old         New          Old      New          Old      New

  **Calendar Year                   **Jan-03**            **Jan-04**            **Jan-05**
  Begin**                                                                       

  Beginning Stocks      0           0            0        0            0        0

  Production            12          13           13       12           0        13

  Intra EC Imports      0           0            0        0            0        0

  Other Imports         45          47           47       48           0        50

  TOTAL Imports         45          47           47       48           0        50

  **TOTAL SUPPLY**      57          **60**       60       **60**       0        **63**

  Intra EC Exports      0           0            0        0            0        0

  Other Exports         0           0            0        0            0        0

  TOTAL Exports         0           0            0        0            0        0

  Domestic Consumption  57          60           60       60           0        63

  TOTAL Use             57          60           60       60           0        63

  Ending Stocks         0           0            0        0            0        0

  **TOTAL               57          **60**       60       **60**       0        **63**
  DISTRIBUTION**                                                                

  Calendar Yr. Imp.     0           0            0        0            0        0
  from U.S.                                                                     

  Calendar Yr. Exp. to  0           0            0        0            0        0
  U.S.                                                                          
  --------------------- ----------- ------------ -------- ------------ -------- ------------

# Production

A very small amount of butter is produced in Egypt on a commercial
scale. Most local production is by farmers for home consumption, with a
small amount of this production marketed locally at weekly village
markets. The lack of a significant domestic butter industry is due to
several factors. The most important factor is the rapid increase in the
production of lower price ghee (shortening) produced from palm oil,
which has decreased the incentive to produce local butter. In addition,
the lack of adequate refrigeration throughout the country makes the
conversion of butter to butter oil and ghee a real necessity.

## Consumption

Egyptians prefer butter made from buffalo milk to butter made from cow
milk due to its distinctive flavor. They also have a preference for
unsalted butter as opposed to salted butter. Only small quantities of
butter are consumed in solid form. This limited quantity is primarily
sold at up-scale supermarkets. Butter is mostly used as an ingredient in
baked goods or in fried foods. Both locally produced and imported butter
are melted and stored in the form of butter ghee. This process allows
the butter to be stored without refrigeration for as long as 9-12
months. Butter ghee is preferred to vegetable oil for cooking. Because
imported butter oil tends to cost a bit more than imported butter, most
people buy butter which they later convert to butter oil at home.
Imported butter is available throughout the year. However, demand
generally increases during the holidays, especially during the fasting
month of Ramadan when 20-30 percent of total annual production is
consumed.

**Prices**

The average import price for butter is currently between \$2,000 and
\$2,100 MT/CIF. According to importers, the current retail price for a
25 kg carton has increased to LE 370, reflecting higher import costs due
to the devaluation of Egyptian pound. This is compared to LE 280 during
the same period in 2003.

**Trade**

Total Egyptian butter imports in 2003 decreased by 10 percent, from
52,490 MT in 2002 to 47,000 MT. Trade sources estimate that Egyptian
butter imports in 2003 included approximately 6,000 MT of butter oil,
most of which came from New Zealand and Australia. In recent years, the
U.S. market share in the Egyptian butter market has been non-existent.
The decline is attributed mainly to the high prices of U.S. butter (in
the absence of the DEIP program) compared to that of other suppliers
from New Zealand and Australia. Egypt's total butter imports from
January 2004 through September 2004 are estimated at 30,000 MT. Trade
sources reported that imports of butter and butter oil during 2005 will
likely increase above the 2003 level.

Under the EU- Egypt Partnership Agreement, butter, other fats and oils
derived from milk, dairy spreads (0405) and other products that fall
under heading (04050090) in packages of more than 20 kg will enter Egypt
without duty beginning in 2006. In addition, import tariffs on European
processed dairy products that fall in HS codes 0403, 04031000, 040390,
04039091, 04039099, 0405 and 04050010 will be reduced in three stages
following the implementation of the agreement:

-   5 percent reduction at basic duty two years after implementation

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-   10 percent reduction of basic duty three years after implementation

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-   15 percent reduction of basic duty four years after implementation

Moreover, European suppliers will receive a 5,000 MT TRQ for butter and
other fats (04050090) at a 25 percent reduction on the applied tariff
rate.

Most butter is imported in 25 kilogram blocks and then re-packaged for
sale to grocers and supermarkets. The shelf life for both imported and
locally produced butter is 18 months. For butter oil the shelf-life is
two years. According to importers, it takes between 15‑21 days to obtain
all of the necessary certificates to clear incoming shipments of butter
and butter oil from Egyptian ports.

  -------------------------- ----------- ------------------ --------------
  **Import Trade Matrix**                                   

  **Country:**               **Egypt**   Units:             MT

  **Commodity:**             **Dairy,                       
                             Butter**                       

  **Time period:**           **CY**                         

  **Imports for**            **2002**                       **2003**

  U.S.                       0           U.S.               0

  Others                                 Others             

  New Zealand                29,804      New Zeland         20,373

  Australia                  11,239      Netherland         7,806

  Ethiopia                   1,003       Australia          5,015

  Poland                     2,490                           

                                                             

                                                             

                                                             

                                                             

                                                             

                                                             

  **Total for Others**       44536                          33194

  **Others not listed**      7,954                          13,806

  **Grand Total**            52490                          47000
  -------------------------- ----------- ------------------ --------------

**Factors Affecting U.S. Exports**

The withdrawal of the DEIP program is the main factor contributing to
the drastic decline of U.S. butter exports to Egypt in the last few
years. Although Egyptian importers of dairy products have a very
favorable opinion of U.S. butter quality, they indicate that price is
the most important factor that influences their decision.

New Zeland, Netherland and Australia maintained their butter export
restitution and their market share in 2003. Not withstanding high
prices, Egyptian importers cite three other factors that lead them to
import from non-U.S. origins. They include the quality of packing
cartons, high moisture content and the white color of U.S. butter,
compared to the yellow color from U.S. competitors.

**Tariffs**

The Egyptian government reduced the import tariffs on butter and other
fats and oils derived from milk to the following:

-   Containers less than 20 kg 12 percent

-   Containers greater than 20 kg 5 percent

Milk Powder

  --------------------- ----------- ------------ -------- ------------ -------- ------------
  **PSD Table**                                                                 

  **Country:**          **Egypt**                                               

  **Commodity:**        **Dairy,                                                
                        Milk,                                                   
                        Nonfat                                                  
                        Dry**                                                   

                                    **2003**              **2004**              **2005**

                        Old         New          Old      New          Old      New

  **Calendar Year                   **Jan-03**            **Jan-04**            **Jan-05**
  Begin**                                                                       

  Beginning Stocks      0           0            0        0            0        0

  Production            0           0            0        0            0        0

  Intra EC Imports      0           0            0        0            0        0

  Other Imports         30          27           15       30           0        32

  TOTAL Imports         30          27           15       30           0        32

  **TOTAL SUPPLY**      30          **27**       15       **30**       0        **32**

  Intra EC Exports      0           0            0        0            0        0

  Other Exports         0           0            0        0            0        0

  TOTAL Exports         0           0            0        0            0        0

  Human Dom.            30          27           15       30           0        32
  Consumption                                                                   

  Other Use, Losses     0           0            0        0            0        0

  Total Dom.            30          27           15       30           0        32
  Consumption                                                                   

  TOTAL Use             30          27           15       30           0        32

  Ending Stocks         0           0            0        0            0        0

  **TOTAL               30          **27**       15       **30**       0        **32**
  DISTRIBUTION**                                                                

  Calendar Yr. Imp.     0           0            0                     0        
  from U.S.                                                                     

  Calendar Yr. Exp. to  0           0            0        0            0        0
  U.S.                                                                          
  --------------------- ----------- ------------ -------- ------------ -------- ------------

**Production**

Egypt has no milk powder production. Imported non-fat dry milk (NFDM)
and whey powder are used mainly for the production of feta cheese,
yogurt and ice cream. Small quantities of NFDM and whey are also
utilized in the production of chocolate and pastries. Limited quantities
of full fat dry milk are also imported and sold for direct human
consumption.

**Consumption**

The consumption of milk powder increased in 2003 following the GOE's
removal of the 45 percent safeguard duty in September 2002. Non-fat dry
milk consumption in 2003 was estimated at 27,000 MT compared to 18,000
MT in 2002. An increase in consumption is expected for 2005.

**Trade**

All of Egypt's dry milk requirements are imported by private sector
companies. According to official trade data, total imports of powder
milk in 2003 increased by about 60 percent as a result of removing the
safeguard duty on imported non-fat dry milk. However, despite the
devaluation of the Egyptian pound against the U.S. dollar and the
general economic slow down, it is expected that NFDM imports will
recover and reach 32,000 MT in 2005. Sweden, New Zealand, Poland and
Denmark are the main suppliers of milk powder to Egypt. The average
import price for non-fat dry milk from the EU is currently \$2,200 per
MT/CIF compared to about \$2,180 per MT/CIF during October 2002.

The shelf life for imported NFDM into Egypt is two years. It normally
takes between 15‑21 days to release a NFDM consignment through Egyptian
customs. The current import tariffs on NFDM are five percent of CIF
value.

  --------------------------- ----------- ------------------- --------------
  **Import Trade Matrix**                                     

  **Country:**                **Egypt**   Units:              MT

  **Commodity:**              **Dairy,                        
                              Milk,                           
                              Nonfat                          
                              Dry**                           

  **Time period:**            **CY**                          

  **Imports for**             **2002**                        **2003**

  U.S.                                    U.S.                 

  Others                                  Others              

  Poland                      2,906       Sweden              5,377

  Sweden                      2,896       Newzealand          4,452

  Newzealand                  2,198       Poland              3,337

  Finland                     1,374       Denmark             2,295

  France                      1,066       France              1,976

                                          Australia           1,632

                                                               

                                                               

                                                               

                                                               

  **Total for Others**        10440                           19069

  **Others not listed**       7,560                           7,931

  **Grand Total**             18000                           27000
  --------------------------- ----------- ------------------- --------------

**Factors Affecting U.S. Exports:**

European powdered milk suppliers are expected to gain a slight advantage
over other suppliers. The ratification of the EU-Egyptian Partnership
Agreement has lead to the elimination of import tariffs on European
products that fall into the following categories:

-   04021010 Powdered Milk Fat Not Exceeding 1.5 percent for Infant

-   04021091 Powdered Milk Fat Not Exceeding 1.5 percent Pack more than
    20 kg

-   04022110 Powder Milk Concentrate Fat Exceeding 1.5 percent N.Swetend

-   04022910 Powder Milk Fat more than 1.5 percent Pack =More 20 kg Conc

-   04022991 Milk Not Powdered, Sweetened