Required Report - public distribution

**Date:** 10/16/2005

**GAIN Report Number:** EG5022

EG5022

**Egypt**

Dairy and Products

**Annual**

2005

**Approved by:**

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

#### U.S. Embassy

**Prepared by:**

Fred Giles & Sherif Ibrahim

**Report Highlights:**

In 2004, Egypt fluid milk production remained unchanged from 2003
levels. Imports of butter dropped significantly, by about 50 percent due
to the increased demand for milk in the international market, especially
in China.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Cairo \[EG1\]

\[EG\]

Table of Contents

[PSD Dairy, Milk, Fluid 2](#__RefHeading___Toc117226410)

[**Production** 3](#production)

[Cheese PSD 4](#cheese)

[**Production** 4](#production-1)

[Consumption 5](#consumption)

[**Prices** 5](#prices)

[Trade 5](#trade)

[**Import Trade Matrix, Cheese** 6](#import-trade-matrix-cheese)

[Tariffs 6](#tariffs)

[**Marketing Opportunities for U.S. Export**
7](#marketing-opportunities-for-u.s.-exports)

[Butter, PSD 7](#butter-psd)

[**Production** 7](#production-2)

[**Consumption** 8](#consumption-1)

[**Prices** 8](#prices-1)

[**Trade** 8](#trade-1)

[**Butter, Import, Trade Matrix** 9](#butter-import-trade-matrix)

[**Factors Affecting U.S. Exports** 9](#factors-affecting-u.s.-exports)

[**Tariffs** 9](#tariffs-1)

[Non Fat Dry Milk PSD 10](#milk-non-fat-dry-milk)

[**Production** 10](#production-3)

[**Consumption** 10](#consumption-2)

[**Trade** 11](#trade-2)

[**NFDM, Import Trade Matrix** 11](#nfdm-import-trade-matrix)

[**Factors Affecting U.S. Exports**
11](#factors-affecting-u.s.-exports-1)

# PSD Dairy, Milk, Fluid 

+---------------------+-------+-------+-------+-------+-------+-------+
| **Egypt**           |       |       |       |       |       |       |
|                     |       |       |       |       |       |       |
| ####### Dairy, Mi   |       |       |       |       |       |       |
| lk, Fluid (1000 MT) |       |       |       |       |       |       |
+---------------------+-------+-------+-------+-------+-------+-------+
|                     |       | **2   |       | **2   |       | **2   |
|                     |       | 004** |       | 005** |       | 006** |
+---------------------+-------+-------+-------+-------+-------+-------+
|                     | Old   | New   | Old   | New   | Old   | New   |
+---------------------+-------+-------+-------+-------+-------+-------+
| ######              |       | *     |       | *     |       | *     |
| Calendar Year Begin |       | *01/2 |       | *01/2 |       | *01/2 |
|                     |       | 004** |       | 005** |       | 006** |
+---------------------+-------+-------+-------+-------+-------+-------+
| Cows In Milk        | 1615  | 1618  | 1617  | 1620  | 0     | 1623  |
+---------------------+-------+-------+-------+-------+-------+-------+
| Cows Milk           | 1675  | 1688  | 1687  | 1690  | 0     | 1695  |
| Production          |       |       |       |       |       |       |
+---------------------+-------+-------+-------+-------+-------+-------+
| Other Milk          | 2125  | 2112  | 2213  | 2110  | 0     | 2115  |
| Production          |       |       |       |       |       |       |
+---------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Production    | 3800  | 3800  | 3900  | 3800  | 0     | 3810  |
+---------------------+-------+-------+-------+-------+-------+-------+
| 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**    | 3800  | **3   | 3900  | **3   | 0     | **3   |
|                     |       | 800** |       | 800** |       | 810** |
+---------------------+-------+-------+-------+-------+-------+-------+
| 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.      | 1634  | 1635  | 1677  | 1640  | 0     | 1642  |
| Consum.             |       |       |       |       |       |       |
+---------------------+-------+-------+-------+-------+-------+-------+
| Factory Use Consum. | 1866  | 1860  | 1923  | 1853  | 0     | 1858  |
+---------------------+-------+-------+-------+-------+-------+-------+
| Feed Use Dom.       | 300   | 305   | 300   | 307   | 0     | 310   |
| Consum.             |       |       |       |       |       |       |
+---------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Dom.          | 3800  | 3800  | 3900  | 3800  | 0     | 3810  |
| Consumption         |       |       |       |       |       |       |
+---------------------+-------+-------+-------+-------+-------+-------+
| **TOTAL             | 3800  | **3   | 3900  | **3   | 0     | **3   |
| DISTRIBUTION**      |       | 800** |       | 800** |       | 810** |
+---------------------+-------+-------+-------+-------+-------+-------+

## Production

##  

In 2004, total fluid milk production is estimated at 3.8 million MT, or
about the same as last year's level. Despite a slight expansion in
existing large dairy farms, Egyptian fluid milk production continues to
fall short of demand. Stagnation of production is mainly due to the lack
of dairy cattle supply which is a direct result of the following:

1\) Ministry of Agriculture (MOA) Decree \# 1355/1998, which requires
imported cattle to be from a country or area declared as unexotic bovine
leukosis (EBL) free. Egyptian farmers tend to keep dairy cattle for 12
years or more for lactation, which increases the likelihood that EBL
will develop as the cattle age. Though the Egyptian government has
decided to allow the importation of breeding cattle from bio-secured
farms under the supervision of Egyptian veterinary authorities, to date
no dairy cattle exports from the United States have taken place. Cost
constraints are a major impediment.

2\) The BSE import ban, which was imposed on cattle imports from all
European countries except Bulgaria and Romania due to the existence of
BSE. 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 origins). This shortage of
milk supply has lead to an increase in milk prices. Fluid milk prices
are currently at LE 1.78 (for 3% milk fat) and could reach LE 1.86 after
adding quality premiums such as fat content. This is compared to LE 1.75
during the same period last year. Prices are expected to remain at or
near the current levels. Approximately 50 percent of total milk
production is consumed at the farm level (20 percent for calf weaning,
15 percent for manufacturing at the farm for retail, and 15 percent for
direct consumption at the farm).

The EU is providing LE 280 million low interest loans with 7 percent, 9
percent and 11 percent interest rates for one year, two- year and more
than two year loans respectively. This program is managed by the
Ministry of Agriculture and is directed to milk producers and processors
in order to improve their operations.

## 

# Cheese 

PSD

+---------------------+-------+-------+-------+-------+-------+-------+
| **Egypt**           |       |       |       |       |       |       |
|                     |       |       |       |       |       |       |
| **Dairy, Cheese     |       |       |       |       |       |       |
| (1000 MT)**         |       |       |       |       |       |       |
+---------------------+-------+-------+-------+-------+-------+-------+
|                     |       | **2   |       | **2   |       | **2   |
|                     |       | 004** |       | 005** |       | 006** |
+---------------------+-------+-------+-------+-------+-------+-------+
|                     | Old   | New   | Old   | New   | Old   | New   |
+---------------------+-------+-------+-------+-------+-------+-------+
| ######              |       | *     |       | *     |       | *     |
| Calendar Year Begin |       | *01/2 |       | *01/2 |       | *01/2 |
|                     |       | 004** |       | 005** |       | 006** |
+---------------------+-------+-------+-------+-------+-------+-------+
| Beginning Stocks    | 0     | 0     | 0     | 0     | 0     | 0     |
+---------------------+-------+-------+-------+-------+-------+-------+
| Production          | 455   | 455   | 457   | 460   | 0     | 462   |
+---------------------+-------+-------+-------+-------+-------+-------+
| Intra EC Imports    | 0     | 0     | 0     | 0     | 0     | 0     |
+---------------------+-------+-------+-------+-------+-------+-------+
| Other Imports       | 10    | 9     | 11    | 10    | 0     | 10    |
+---------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Imports       | 10    | 9     | 11    | 10    | 0     | 10    |
+---------------------+-------+-------+-------+-------+-------+-------+
| **TOTAL SUPPLY**    | 465   | **    | 468   | **    | 0     | **    |
|                     |       | 464** |       | 470** |       | 472** |
+---------------------+-------+-------+-------+-------+-------+-------+
| Intra EC Exports    | 0     | 0     | 0     | 0     | 0     | 0     |
+---------------------+-------+-------+-------+-------+-------+-------+
| Other Exports       | 5     | 5     | 6     | 6     | 0     | 7     |
+---------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Exports       | 4     | 5     | 6     | 6     | 0     | 7     |
+---------------------+-------+-------+-------+-------+-------+-------+
| Human Dom.          | 460   | 459   | 462   | 464   | 0     | 465   |
| Consumption         |       |       |       |       |       |       |
+---------------------+-------+-------+-------+-------+-------+-------+
| Other Use, Losses   | 0     | 0     | 0     | 0     | 0     | 0     |
+---------------------+-------+-------+-------+-------+-------+-------+
| Total Dom.          | 460   | 459   | 462   | 464   | 0     | 465   |
| Consumption         |       |       |       |       |       |       |
+---------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Use           | 465   | 464   | 468   | 470   | 0     | 472   |
+---------------------+-------+-------+-------+-------+-------+-------+
| Ending Stocks       | 0     | 0     | 0     | 0     | 0     | 0     |
+---------------------+-------+-------+-------+-------+-------+-------+
| **TOTAL             | 465   | **    | 468   | **    | 0     | **    |
| DISTRIBUTION**      |       | 464** |       | 470** |       | 472** |
+---------------------+-------+-------+-------+-------+-------+-------+

## Production

In 2004, Egypt's total annual production of feta cheese is estimated at
about 360,000 MT, 70 percent of which is produced by small unlicensed
factories (about 5000 factories) from unpasteurized milk, despite the
new standard (yet to be enforced) which prohibits the production of feta
cheese from unpasteurized milk. The balance is produced by fairly modern
factories. Total cheese production is estimated at about 455,000 MT and
is expected reach 460,000 MT in 2005. The most important type of cheese
produced in Egypt is feta. Feta production, both commercial and
homemade, makes up 75 percent of the cheese produced and consumed in
Egypt. The rest of production is spread among hard Romano (about 65,000
MT), processed cheese about 40,000 MT, and a small but growing quantity
of mozzarella cheese. There is also a small amount of blue cheese and
cheddar cheese. Egyptian cheese production is steadily increasing but
still falls short of demand. Both the private and public sectors produce
cheese. In recent years however, the public sector market share has
drastically decreased. Under the current economic reform policy, the
Government of Egypt has been trying to sell the only public sector
company for dairy products (Misr Dairy) to private sector buyers. So far
only one factory in Alexandria has been sold to a private sector
investor.

## 

# Consumption

In 2004, total cheese consumption is estimated at 459,000 MT, compared
to 454,000 MT in 2003. Current per capita consumption of cheese is
estimated at 6.5 kilograms. Cheese is an important part of the Egyptian
diet and many people eat cheese with at least one meal per day. Most
cheese is consumed with bread. Feta cheese is both the most popular and
least expensive type of cheese available. The hard cheese known as
"Romi" and processed cheese known as "Nisto" are also among the popular
cheeses consumed in Egypt.

In 2004, about 350 MT of imported fancy cheeses such as parmasan,
camembert and brie were consumed. Consumption of cheddar and mozzarella
cheese (both natural and processed) is also rising due to the increased
number of fast food restaurants currently operating in Egypt.

## Prices

The average wholesale price for feta cheese in 2004 ranged between LE 8
‑12 per Kg, and retail prices varied between LE 12 and 18 per Kg
(depending on the type). The wholesale price of locally produced romano
cheese is between LE 13.50 to 18.50 per kilo and retailed for LE 17 to
24 per kg at the retail level. In 2004, prices of imported cheese from
Europe ranged between \$3,050 and \$7,300 per MT CIF, depending on the
type of cheese. The price for imported cheddar cheese is currently
\$2,929 per MT C&F, compared to \$2,405 per MT C&F for the same period
in 2003. Gouda and Edam cheese are currently being imported at costs of
\$3,500 and \$3,57 per MT CIF, respectively, and are being retailed for
about LE 29 and 27 per kilo, respectively. Imported fancy cheese such as
Old Amsterdam, parmesan and camembert retail between LE 85 and LE 125
per kg.

# Trade

The Netherlands, Australia and New Zealand continue to be by far, the
major cheese suppliers to the Egyptian market. Import demand is
generated largely by the more affluent segments of the population, the
tourism sector, hotels and restaurants. According to Egyptian import
statistics, cheese imports in 2004 are estimated at 9,000 MT. The
current stagnation in imports is mainly due to the increased export
prices of cheese, which makes imports more expensive. Egypt's total
cheese exports in 2004 are estimated at about 5000 MT, mostly feta
cheese to other Arab countries.

The EU-Egyptian Partnership Agreement which went into effect in June
2004, offers several important tariff concessions for European dairy
suppliers. However, European cheese exporters are not gaining much from
the agreement. According to the agreement, Egypt is required to allow a
2,000 MT TRQ at 50 percent of the basic tariff for cheese and curd
products from the EU.

Following are the product codes for which the EU has TRQs:

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

It usually takes three weeks for imported cheese to be released by
Egyptian import authorities. A great deal of that time is taken to
review all of the certifications required by the Ministries of Health,
Agriculture, and Economy and Trade. The shelf‑life for imported cheese
is between 6 months and one year depending on the product.

## Import Trade Matrix, Cheese

+--------------------+-------------+--------------------+-------------+
| **Egypt**          |             |                    |             |
|                    |             |                    |             |
| **Dairy, Cheese**  |             |                    |             |
|                    |             |                    |             |
| ####### MT         |             |                    |             |
+--------------------+-------------+--------------------+-------------+
|                    | **2003**    |                    | **2004**    |
+--------------------+-------------+--------------------+-------------+
| U.S.               | 148         | U.S.               | 114         |
+--------------------+-------------+--------------------+-------------+
| Others             |             | Others             |             |
+--------------------+-------------+--------------------+-------------+
| Netherlands        | 3,199       | Netherlands        | 3,343       |
+--------------------+-------------+--------------------+-------------+
| Australia          | 1,199       | Australia          | 1,018       |
+--------------------+-------------+--------------------+-------------+
| Poland             | 582         | New Zealand        | 665         |
+--------------------+-------------+--------------------+-------------+
| New Zealand        | 517         | Saudi-Arabia       | 558         |
+--------------------+-------------+--------------------+-------------+
| Denmark            | 359         | Ireland            | 554         |
+--------------------+-------------+--------------------+-------------+
| France             | 146         | Poland             | 437         |
+--------------------+-------------+--------------------+-------------+
| **Total for        | 6,002       |                    | 6,575       |
| Others**           |             |                    |             |
+--------------------+-------------+--------------------+-------------+
| **Others not       | 3,232       |                    | 2,311       |
| listed**           |             |                    |             |
+--------------------+-------------+--------------------+-------------+
| **Grand Total**    | 9,382       |                    | 9,000       |
+--------------------+-------------+--------------------+-------------+

# Tariffs

All cheeses, packaged under twenty kilograms are subject to a 22 percent
tariff, while all cheeses, packaged over twenty kilograms are subject to
a flat 12 percent tariff. There is an additional service fee of 3
percent, and a 1 percent sales tax. Most cheese imports are in 20 kg
packages.

## Marketing Opportunities for U.S. Exports

Opportunities for U.S. cheese exports to Egypt exist, but they are
limited due to lack of price competitiveness. The primary factor
influencing cheese imports is price, but there is a growing segment of
consumers who consider quality before price when buying cheese. Egyptian
consumers prefer the taste and texture of European cheddar cheese over
that from the United States. However, the availability of a DEIP program
for U.S. cheddar cheese could be a significant factor in expanding U.S.
cheese exports (particularly cheddar cheese for manufacturing) to the
Egyptian market.

# Butter, PSD

+---------------------+-------+-------+-------+-------+-------+-------+
| **Egypt**           |       |       |       |       |       |       |
|                     |       |       |       |       |       |       |
| **Dairy, Butter**   |       |       |       |       |       |       |
|                     |       |       |       |       |       |       |
| **(1000 MT)**       |       |       |       |       |       |       |
+---------------------+-------+-------+-------+-------+-------+-------+
|                     |       | **2   |       | **2   |       | **2   |
|                     |       | 004** |       | 005** |       | 006** |
+---------------------+-------+-------+-------+-------+-------+-------+
|                     | Old   | New   | Old   | New   | Old   | New   |
+---------------------+-------+-------+-------+-------+-------+-------+
| ######              |       | *     |       | *     |       | *     |
| Calendar Year Begin |       | *01/2 |       | *01/2 |       | *01/2 |
|                     |       | 004** |       | 005** |       | 006** |
+---------------------+-------+-------+-------+-------+-------+-------+
| Beginning Stocks    | 0     | 0     | 0     | 0     | 0     | 0     |
+---------------------+-------+-------+-------+-------+-------+-------+
| Production          | 12    | 12    | 13    | 11    | 0     | 12    |
+---------------------+-------+-------+-------+-------+-------+-------+
| Intra EC Imports    | 0     | 0     | 0     | 0     | 0     | 0     |
+---------------------+-------+-------+-------+-------+-------+-------+
| Other Imports       | 48    | 28    | 50    | 30    | 0     | 35    |
+---------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Imports       | 48    | 28    | 50    | 30    | 0     | 35    |
+---------------------+-------+-------+-------+-------+-------+-------+
| **TOTAL SUPPLY**    | 60    | *     | 63    | *     | 0     | *     |
|                     |       | *40** |       | *41** |       | *47** |
+---------------------+-------+-------+-------+-------+-------+-------+
| 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            | 60    | 40    | 63    | 41    | 0     | 47    |
| Consumption         |       |       |       |       |       |       |
+---------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Use           | 60    | 40    | 63    | 41    | 0     | 47    |
+---------------------+-------+-------+-------+-------+-------+-------+
| Ending Stocks       | 0     | 0     | 0     | 0     | 0     | 0     |
+---------------------+-------+-------+-------+-------+-------+-------+
| **TOTAL             | 60    | *     | 63    | *     | 0     | *     |
| DISTRIBUTION**      |       | *40** |       | *41** |       | *47** |
+---------------------+-------+-------+-------+-------+-------+-------+

## Production

A very small quantity of butter is produced in Egypt on a commercial
scale, approximately 12,000 MT. The bulk of local butter production is
by farmers for home consumption, with a small amount of this production
marketed locally at weekly village markets. The absence of a significant
domestic butter industry in Egypt is due to several factors, the most
important being the lack of adequate refrigeration throughout the
country which makes the conversion of butter to butter oil and ghee
necessary. Also, there is an increasing consumer trend toward the use of
palm olein ghee rather than butter.

## 

## 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 versus salted butter. Only small quantities of butter are
consumed in solid form and mostly sold at up-scale supermarkets. With
pita style bread being the main type of bread used in Egypt, butter is
rarely used directly on bread. Rather, 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. That
allows it to be kept without refrigeration for as long as 9-12 months.
Butter ghee is preferred to vegetable oil for cooking. As a result of
relatively higher prices of imported butter oil compared to imported
butter, a large number of consumers buy butter, rather than butter oil,
and convert it at home. Imported butter is available throughout the year
and demand increases during holidays, especially the fasting month of
Ramadan where 20-30 percent of total annual demand is consumed.

## Prices

The average import price of butter is currently \$2,250 MT/CIF, compared
to an average of

\$1,730 MT/CIF in September 2004. Reportedly, the increase in import
prices was mainly due to the increased demand in China for full fat
milk. As a result, less milk was available for the production of butter.
During the last quarter of 2004, the retail price of imported butter
increased significantly, especially prior to Ramadan, and reached LE 315
per carton of 25 kg, reflecting higher import costs. According to
importers, the retail price for a 25 kg carton is currently LE 367. This
is compared to LE 320 during the same period in 2004. However, importers
expect retail prices to remain at LE 367 during Ramadan.

## Trade

New Zealand and the Netherlands are the major suppliers of butter to
Egypt. In 2004, total Egyptian butter imports decreased dramatically to
28,000 MT, compared to 47,000 MT in 2003. This dramatic decrease in
total butter imports was mainly due to the increased prices in the
international market as mentioned earlier. In recent years, there has
been no U.S. presence in the Egyptian butter market. The decline in U.S.
market share is mainly due to the high prices of U.S. butter (in the
absence of the DEIP program) compared to that of competitor suppliers.
In 2005 imports of butter and butter oil will likely remain at the 2004
level.

The EU maintained the butter export restitution program in 2004, paying
out euro 1,100 per MT. Under the EU-Egypt Partnership Agreement, 5000 MT
of butter, other fats and oils derived from milk, dairy spreads and
other products that fall under heading HS 04050090 in packages greater
than 20 kg, enter Egypt at 5 percent below the basic duty. This puts the
current duty on EU butter at 3.75 percent. According to the agreement,
three years after implementation there will be a 10 percent reduction of
basic duty, and a 15 percent reduction four years after implementation.
In addition, European suppliers will receive a 5000 MT tariff rate quota
(TRQ) at a 25 percent reduction from the applied tariff.

Most butter is imported in 25 kilograms 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. 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.

## Butter, Import, Trade Matrix

+--------------------+-------------+--------------------+-------------+
| **Egypt**          |             |                    |             |
|                    |             |                    |             |
| ###                |             |                    |             |
| #### Dairy, Butter |             |                    |             |
|                    |             |                    |             |
| ####### MT         |             |                    |             |
+--------------------+-------------+--------------------+-------------+
|                    | **2003**    |                    | **2004**    |
+--------------------+-------------+--------------------+-------------+
| U.S.               | 0           | U.S.               | 0           |
+--------------------+-------------+--------------------+-------------+
| Others             |             | Others             |             |
+--------------------+-------------+--------------------+-------------+
| New Zealand        | 20,373      | New Zealand        | 12,140      |
+--------------------+-------------+--------------------+-------------+
| Netherlands        | 7,806       | Netherlands        | 5,635       |
+--------------------+-------------+--------------------+-------------+
| Australia          | 5,015       | Australia          | 1,404       |
+--------------------+-------------+--------------------+-------------+
|                    |             | Belgium            | 1,374       |
+--------------------+-------------+--------------------+-------------+
|                    |             | Finland            | 1,074       |
+--------------------+-------------+--------------------+-------------+
| **Total for        | 33194       |                    | 21627       |
| Others**           |             |                    |             |
+--------------------+-------------+--------------------+-------------+
| **Others not       | 13,806      |                    | 6,373       |
| listed**           |             |                    |             |
+--------------------+-------------+--------------------+-------------+
| **Grand Total**    | 47000       |                    | 28000       |
+--------------------+-------------+--------------------+-------------+

## Factors Affecting U.S. Exports

The withdrawal of the Dairy Export Incentive Program (DEIP) is the main
factor behind the drastic decline of U.S. butter exports to Egypt in
recent 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.

In addition to the prohibitive price of U.S. butter, Egyptian importers
cite three other reasons for the absence of U.S market share in
Egypt: 1) poor quality of packing cartons; 2) high moisture content,
and; 3) the white color of U.S. butter.

## Tariffs

The current import tariffs on butter and other fats and oils derived
from milk are as follows:

**[Size]{.underline}** **[Tariff]{.underline}**

######## Containers up to 20 kg 12 percent

> Other 5 percent

In addition, there is a 3 percent customs service fee and a 1 percent
sales tax.

## Milk Non Fat Dry Milk 

+---------------------+-------+-------+-------+-------+-------+-------+
| **Egypt**           |       |       |       |       |       |       |
|                     |       |       |       |       |       |       |
| ####### Dair        |       |       |       |       |       |       |
| y, Milk, Nonfat Dry |       |       |       |       |       |       |
|                     |       |       |       |       |       |       |
| **MT**              |       |       |       |       |       |       |
+---------------------+-------+-------+-------+-------+-------+-------+
|                     |       | **2   |       | **2   |       | **2   |
|                     |       | 004** |       | 005** |       | 006** |
+---------------------+-------+-------+-------+-------+-------+-------+
|                     | Old   | New   | Old   | New   | Old   | New   |
+---------------------+-------+-------+-------+-------+-------+-------+
| ######              |       | *     |       | *     |       | *     |
| Calendar Year Begin |       | *01/2 |       | *01/2 |       | *01/2 |
|                     |       | 004** |       | 005** |       | 006** |
+---------------------+-------+-------+-------+-------+-------+-------+
| 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    | 24    | 32    | 23    | 0     | 25    |
+---------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Imports       | 30    | 24    | 32    | 23    | 0     | 25    |
+---------------------+-------+-------+-------+-------+-------+-------+
| **TOTAL SUPPLY**    | 30    | *     | 32    | *     | 0     | *     |
|                     |       | *24** |       | *23** |       | *25** |
+---------------------+-------+-------+-------+-------+-------+-------+
| 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    | 24    | 32    | 23    | 0     | 25    |
| Consumption         |       |       |       |       |       |       |
+---------------------+-------+-------+-------+-------+-------+-------+
| Other Use, Losses   | 0     | 0     | 0     | 0     | 0     | 0     |
+---------------------+-------+-------+-------+-------+-------+-------+
| Total Dom.          | 30    | 24    | 32    | 23    | 0     | 25    |
| Consumption         |       |       |       |       |       |       |
+---------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Use           | 30    | 24    | 32    | 23    | 0     | 25    |
+---------------------+-------+-------+-------+-------+-------+-------+
| Ending Stocks       | 0     | 0     | 0     | 0     | 0     | 0     |
+---------------------+-------+-------+-------+-------+-------+-------+
| **TOTAL             | 30    | *     | 32    | *     | 0     | *     |
| DISTRIBUTION**      |       | *24** |       | *23** |       | *25** |
+---------------------+-------+-------+-------+-------+-------+-------+

## Production

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

## Consumption

Nonfat dry milk (NFDM) is used mainly for manufacturing purposes such as
feta cheese, yogurt, ice cream as well as chocolate and pastries. In
2004, the consumption of milk powder declined to 24,000 MT, compared to
27,000 MT in 2003. The decline was driven by an increase in
international prices for milk. Consumption of locally produced fluid
milk and imported whey has increased during the past two years in order
to fill the gap created by lower imports of NFDM.

## Trade

The private sector imports all of Egypt's dry milk requirements.
According to official trade data, total imports of milk powder in 2004
declined by 11 percent to an estimated level of 24,000 MT. Imports are
expected to further decline to 23,000 MT in 2005 due to continued price
increases.

New Zealand and Sweden are the main suppliers of milk powder to Egypt.
Egyptian NFDM imports from the United States in 2004 increased to 1,320
MT compared to zero in 2003. The average import price for non-fat dry
milk is currently \$2,250 per MT CIF compared to \$1,933 per MT CIF
during September 2004. The EU continues to maintain its milk powder
export restitution; though it reduced its subsidy on milk powder exports
from 1,510 euros per MT to 1,110 euros per MT.

The current import tariffs on NFDM are as follows: milk and cream not
containing added sugar, packages over 20 kg: 5 percent of CIF value;
while packages less than 20 kg: 15 percent of CIF value.

## NFDM, Import Trade Matrix

+--------------------+-------------+--------------------+-------------+
| **Egypt**          |             |                    |             |
|                    |             |                    |             |
| ####### Dairy      |             |                    |             |
| , Milk, Nonfat Dry |             |                    |             |
|                    |             |                    |             |
| MT                 |             |                    |             |
+--------------------+-------------+--------------------+-------------+
|                    | **2003**    |                    | **2004**    |
+--------------------+-------------+--------------------+-------------+
| U.S.               |             | U.S.               | 1,320       |
+--------------------+-------------+--------------------+-------------+
| Others             |             | Others             |             |
+--------------------+-------------+--------------------+-------------+
| Sweden             | 5,377       | New Zealand        | 4,841       |
+--------------------+-------------+--------------------+-------------+
| New Zealand        | 4,452       | Sweden             | 4,783       |
+--------------------+-------------+--------------------+-------------+
| Poland             | 3,337       | Finland            | 1,770       |
+--------------------+-------------+--------------------+-------------+
| Denmark            | 2,295       | Poland             | 1,629       |
+--------------------+-------------+--------------------+-------------+
| France             | 1,976       | Denmark            | 1,409       |
+--------------------+-------------+--------------------+-------------+
| Australia          | 1,632       | France             | 1,153       |
+--------------------+-------------+--------------------+-------------+
|                    |             | Germany            | 694         |
+--------------------+-------------+--------------------+-------------+
|                    |             | Canada             | 485         |
+--------------------+-------------+--------------------+-------------+
|                    |             | Greece             | 475         |
+--------------------+-------------+--------------------+-------------+
| **Total for        | 19,069      |                    | 17,239      |
| Others**           |             |                    |             |
+--------------------+-------------+--------------------+-------------+
| **Others not       | 7,931       |                    | 5,441       |
| listed**           |             |                    |             |
+--------------------+-------------+--------------------+-------------+
| **Grand Total**    | 27,000      |                    | 24,000      |
+--------------------+-------------+--------------------+-------------+

## Factors Affecting U.S. Exports

Under the EU- Egypt Partnership Agreement, which went into effect in
June 2004, Egypt eliminated import tariffs on 12,000 MT of European
products that fall under the following

HS codes:

-   04021010

-   04021091

-   04022110

-   04022910

-   04022991

Most, if not all, packages must be over 20 kg in order to benefit from
the tariff preference. The applied import tariff on NFDM is currently 5
percent for packages over 20 kg and 15 percent for packages less than 20
kg.