Required Report - public distribution

**Date:** 3/9/2005

**GAIN Report Number:** EG5004

EG5004

**Egypt**

**Grain and Feed**

**Annual**

**2005**

**Approved by:**

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

US Embassy

**Prepared by:**

Fred Giles & Sherif Ibrahim

**Report Highlights:**

Egypt\'s total wheat imports in MY 2004/05 are expected to increase by
nearly 9 percent over MY 2003/04 and reach 7.6 MMT. Egypt\'s total corn
imports for MY 2004/05 are expected to increase by approximately 5
percent. The U.S. market share for corn is estimated at 81 percent.
Egyptian rice exports for CY 2004 are estimated at 770,000 MT. However,
it is expected to decrease to 550,000 MT in CY 2005.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Unscheduled Report

Cairo \[EG1\]

\[EG\]

Table of Contents

[Wheat PSD Table 3](#__RefHeading___Toc98136337)

[Production 3](#__RefHeading___Toc98136338)

[Consumption 4](#__RefHeading___Toc98136339)

[Trade 4](#__RefHeading___Toc98136340)

[Import Trade Matrix **Error! Bookmark not
defined.**](#__RefHeading___Toc98136341)

[Stocks 6](#__RefHeading___Toc98136342)

[Factors Affecting U.S.Trade 6](#__RefHeading___Toc98136343)

[PSD Table Error! Bookmark not defined.](#__RefHeading___Toc98136344)

[Production 7](#__RefHeading___Toc98136345)

[Consumption & Utilization 7](#__RefHeading___Toc98136346)

[Trade 8](#__RefHeading___Toc98136347)

[Import Trade Matrix Error! Bookmark not
defined.](#__RefHeading___Toc98136348)

[PSD Table Rice **Error! Bookmark not
defined.**](#__RefHeading___Toc98136349)

[Export Trade Matrix Error! Bookmark not
defined.](#__RefHeading___Toc98136350)

[Stocks 12](#__RefHeading___Toc98136351)

[]{#__RefHeading___Toc98136337 .anchor}Wheat PSD Table

# 

  ----------------------- ----------- ------------- ------- ------------- ------- -------------
                                                                                  

  **Country:**            **Egypt**                                               

  **Commodity:**          **Wheat**                                               

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

                          Old         New           Old     New           Old     New

  **Market Year Begin**               **07/2003**           **07/2004**           **07/2005**

  Area Harvested          1038        1029          1050    1092          0       1120

  Beginning Stocks        1316        1650          1806    1900          0       2060

  Production              6500        6443          6550    6630          0       6800

  TOTAL Mkt. Yr. Imports  7300        6873          7500    7500          0       7600

  Jul-Jun Imports         7300        6873          7500    7500          0       7600

  Jul-Jun Import U.S.     3985        3624          3000    3000          0       5000

  **TOTAL SUPPLY**        15116       **14966**     15856   **16030**     0       **16460**

  TOTAL Mkt. Yr. Exports  10          0             0       0             0       0

  Jul-Jun Exports         10          0             0       0             0       0

  Feed Dom. Consumption   50          100           50      100           0       100

  TOTAL Dom. Consumption  13300       13066         13800   13970         0       14395

  Ending Stocks           1806        1900          2056    2060          0       2065

  **TOTAL DISTRIBUTION**  15116       **14966**     15856   **16030**     0       **16460**
  ----------------------- ----------- ------------- ------- ------------- ------- -------------

[]{#__RefHeading___Toc98136338 .anchor}Production

Wheat is planted in October/November and harvested in April/May. The
total wheat area for MY 2004/2005 is estimated at 1,092,000 HA, 6
percent more than the 2003/2004 area. For MY 2005/2006, Ministry of
Agriculture experts forecast that planted area will increase 2.6 percent
above 2004/05 level. Total production for MY 2004/2005 is expected to be
6,630,000 MT compared to 6,443,000 MT for 2003/2004. This increase is
expected due to an increase in areas planted with high-yielding
varieties.

The average yield for the MY 2003/2004 crop is estimated at 6.2 MT/HA.
According to the Ministry of Agriculture, all wheat areas are cultivated
with new varieties (Gemmiza 7, Gemmiza 9, Sakha 93 and Giza 168), which
have potential to yield 7.6 MT/HA. The government has increased the
procurement price to LE 1,100/ MT (\$ 188 per MT) for the 2004/05 wheat
crop from LE 966/ MT (\$155 per MT) in 2003/04. This price is higher
than the current Ukrainian wheat prices (LE 960/MT). The total quantity
of locally produced wheat sold to the Ministry of Supply in MY 2003/2004
was 2,150,000 MT. For the 2004/05 crop, the General Authority for Supply
Commodities (GASC) plans to purchase 3 million MT. However, it is
expected that the GASC will not exceed the level of procurement made
last year.

[]{#__RefHeading___Toc98136339 .anchor}Consumption

Egypt continues to have one of the highest wheat per capita consumption
levels in the world.

Total consumption of wheat in MY 2004/2005 is estimated at 13.9 MMT
including nearly 7.5 MMT of imported wheat. Since the beginning of MY
2004/05 (July 2004) through the end of February, Ministry of Supply
(GASC) purchased 3.65 MMT of imported wheat and 2 MMT of locally
produced wheat in addition to 500,000 MT of locally produced white corn
to produce 82 percent extraction flour used for the subsidized baladi
bread. The subsidy on baladi bread cost the government close to LE 3.8
billion last year. During the same period, private sector companies
purchased 1,661,559 MT of imported wheat to produce 72 percent
extraction flour used in the production of high quality flat bread and
European type bread, pastries and pasta. Most of the domestic wheat crop
is sold directly to consumers or retained by farmers for on-farm
consumption.

Egyptian per capita consumption of wheat in MY 2004/2005 is expected to
reach 186 Kg. A further increase is expected for 2005/06. There are two
reasons for increasing wheat consumption. First, the current foreign
exchange availability has led private and public sector flour mills to
import more wheat. This, coupled with the increase in the value of the
Egyptian pound against the U.S. dollar (LE 5.85/\$ 1 down from LE
6.25/\$1 three months earlier), is encouraging private sector mills to
cut back their operations. This led to decrease in wheat flour prices
from LE 1,450 per Mt to LE 1,350 per Mt. Most private sector mills are
currently operating at 65-75 percent capacity. There are a few operating
at full capacity. This is in stark contrast to a capacity rate of 40‑60
percent in MY 2003/04. The difference is that importers have easy access
to hard currency through commercial banks. Second, the prices for bread
substitutes such as rice and potatoes increased which reflected
positively on wheat products consumption such as pasta.

The Egyptian milling industry has more than adequate capacity to cover
the country's need for 72 percent extraction flour. While total
consumption of 72 percent extracted flour is estimated at 1.8 MMT or 2.5
MMT of wheat, the total milling capacity is currently estimated at
2.7MMT of 72 percent flour, or 3.76/MMT of wheat. The public sector
milling industry consists of 126 mills (mostly small and medium size)
and has a total capacity of approximately 7 MMT per year. There are
seven public sector companies that operate these mills, and all are
affiliated with one holding company (Food Industries Holding Company).
Of the 126 public sector mills, 109 mills are currently used for the
production of 82 percent flour and 7 mills are used to produce 72
percent flour with total capacity of 6,230 MT per day (1.86 MMT
annually). Shares of some of these companies have been sold to private
investors during the past few years. Although the majority of shares are
held by the private sector, the holding company maintains complete
control of these mills. Given that wheat is a strategic commodity in
Egypt, the government is expected to retain control of most of the
milling industry (particularly for the subsidized baladi bread) for the
foreseeable future. There are nearly 36 private sector commercial mills,
with total capacity of 9,000 MT per day (2.8 MMT annually). These are
permitted to produce 72 percent flour only.

## 

[]{#__RefHeading___Toc98136340 .anchor}Trade

Egypt's total wheat imports are expected to increase during this
marketing year (2004/05).

The United States continues to be the largest wheat supplier to the
Egyptian market. From the beginning of MY 2004/05 through the end of
February 2005, U.S. exports accounted for 26 percent (1,417,460 MT) of
Egyptian wheat imports and the remainder was imported from Russia,
Argentina, France, and Australia. It is expected that U.S. wheat exports
to the Egyptian market will continue to remain strong in MY 2005/06. In
its last tender, dated March 5, 2005, the Ministry of Supply purchased
60,000 MT of wheat from France at a reported price of \$129.95/ MT FOB,
and 60,000 MT from Australia at a reported price of \$145.20/ MT FOB for
deliveries through the last half of April 2005. In January 2005, the
private sector purchased 110,000 MT of wheat from Russia at a reported
price of \$155/ MT C&F, 10, 000 MT from Argentina at a reported price
\$157/ MT C&F and 5,000 MT from Hungary at a reported price \$163/ MT
C&F. The current official \$/LE exchange rate is 5.82.

For MY 2005/2006, Egyptian wheat imports are expected to reach
approximately 7.6 MMT, with GASC projected to import nearly 5.8 MMT, and
the rest to be imported by the private sector. This increase in GASC
imports is expected because of the increased amount of wheat imported
for the production of 72 percent flour. Imports of wheat flour have
become insignificant and are now limited to international donations such
as the 20,000 MT donated by France during this marketing year. Customs
duties for wheat and corn are one percent plus 2 percent other port
charges.

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

  **Country:**          **Egypt**       Units:               1,000 MT

  **Commodity:**        **Wheat**                            

  **Time period:**                                           

  **Imports for**       **MY2002/03**                        **MY2003/04**

  U.S.                  1,336           U.S.                 3,624

  Others                                Others               

  France                2,280           Australia            2,180

  Russia                1,339           France               336

  Australia             360             Russia               147

  Ukraine               62              Germany              72

  Poland                51              Sweden               58

  Pakistan              50              Brazil               48

  Yugoslavia            38              Syria                236

  India                 28              Spain                4

  Romania               15                                   

  Kazakhstan            12                                   

  **Total for Others**  4235                                 3081

  **Others not listed** 60                                   168

  **Grand Total**       5631                                 6873
  --------------------- --------------- -------------------- ---------------

# 

[]{#__RefHeading___Toc98136342 .anchor}Stocks

The Ministry of Supply and Domestic Trade has a policy of maintaining a
five month supply of strategic stocks. However, due to limited storage
capacity that constrains the government\'s target, the strategic stocks
are now redefined to include wheat import purchases in the pipeline,
usually in the range of three months of annual consumption. Currently,
total covered storage capacity for wheat is estimated at one million
metric tons, including about 350,000 MT in silos at three different
ports, 250,000 MT in inland silos and 400,000 MT in open storage mostly
in metropolitan areas. In addition to government storage facilities,
several private sector traders and mills currently have their own
receiving and storage facilities, estimated at 500,000 MT. In order to
increase the storage capacity, the Ministry of Supply is currently
promoting a project to encourage private building of 50 inland silos
with 30,000 MT each in different locations throughout the country. The
Ministry of Supply will commit to use 60 percent of the capacity (90,000
MT) of each silos capacity at the prevailing storage fee for 5 years.

[]{#__RefHeading___Toc98136343 .anchor}Factors Affecting U.S. Trade

Both government and private sector buyers prefer U.S. wheat as they
trust the quality control system in the United States. However, due to
the current market situation namely higher prices, Egyptian milling
companies are now willing to accept lower quality wheat. Private sector
companies are now sourcing more wheat from non-U.S. origins such as
Russia, Ukraine, and Hungary.

U.S. Wheat Associates continues to provide trade services and quality
seminars to Egyptian millers, wheat buyers and traders. U.S Wheat
Associate's quality seal program is widely used to promote products
containing U.S. wheat. The USDA GSM‑102 Program (three‑year credit
guarantee program) is available for both public and private sector
importers of U.S. agricultural commodities, but importers no longer use
the program at present citing the potential for high exchange rate risk
in the Egyptian market. However, GASC has recently expressed interest in
use of the program to import wheat from the United States.

  ----------------------- ----------- ------------- ------- ------------- ------- -------------
  Corn PSD Table                                                                  

  **Country:**            **Egypt**                                               

  **Commodity:**          **Corn**                                                

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

                          Old         New           Old     New           Old     New

  **Market Year Begin**               **10/2003**           **10/2004**           **10/2005**

  Area Harvested          720         672           730     680           0       700

  Beginning Stocks        195         100           188     100           0       100

  Production              6150        5740          6200    5780          0       5950

  TOTAL Mkt. Yr. Imports  3743        **3906**      4300    4100          0       4200

  Oct-Sep Imports         3743        **3148**      4300    4150          0       4200

  Oct-Sep Import U.S.     3142        2900          3200    3000          0       3200

  **TOTAL SUPPLY**        10088       **9746**      10688   **9980**      0       **10250**

  TOTAL Mkt. Yr. Exports  0           0             0       0             0       0

  Oct-Sep Exports         0           0             0       0             0       0

  Feed Dom. Consumption   8100        8120          8600    8350          0       8400

  TOTAL Dom. Consumption  9900        9646          10500   9880          0       10150

  Ending Stocks           188         100           188     100           0       100

  **TOTAL DISTRIBUTION**  10088       **9746**      10688   **9980**      0       **10250**
  ----------------------- ----------- ------------- ------- ------------- ------- -------------

[]{#__RefHeading___Toc98136345 .anchor}Production

The total corn area for the MY 2004/2005 is estimated at 680,000 HA, of
which 630,000 HA are white corn. The remainder is yellow corn. Area
harvested is one percent above 2003/2004 levels. The small increase in
corn acreage is attributed to increasing demand in corn silage for
livestock feed production. A further increase in corn acreage is
expected in MY 2005/2006. This expected growth is mostly attributed to
the increased price for imported yellow corn. The same factor is
expected to lead farmers to switch from rice to corn. In MY 2004/2005,
total corn production is estimated at about 5.7 MMT. For MY 2005/2006,
total corn production is expected to increase and reach 5.9 MMT.

[]{#__RefHeading___Toc98136346 .anchor}Consumption & Utilization

## 

Egyptian total corn consumption in MY 2004/05 is estimated at 9.88 MMT,
or approximately one percent over the MY 2003/04 level. The majority of
the local corn crop is utilized for animal feed (mostly consumed on
farm) and about 1.5 MMT are used for food purposes (either milled or
consumed fresh). Large and commercial end-users and feed mills rely on
imported yellow corn to meet their requirements.

There has been a strong demand for feed corn in MY 2004/05 and this is
expected to continue during MY 2005/06. The increase in Egypt's corn
consumption was due to the significant increase in corn consumption by
livestock as well as poultry producers. Also, there has been a
significant quantity of green corn utilized in the production of silage
for both dairy and beef animal feed. In addition, there has been an
increased utilization of corn in the production of the 20:80 corn-wheat
composite flour for baladi bread. In MY 2004/05, about 500,000 MT of
locally produced white corn is expected to be delivered to the Ministry
of Supply for the production of subsidized baladi bread. For MY 2005/06,
total white corn delivery is expected to reach 600,000 MT.

There is small but growing demand for food products containing corn
(snack food). This, in addition to the increase in demand for corn oil,
has contributed to the increased demand for corn. Egypt imports nearly
400,000 MT of yellow corn annually for the production of starch and
sweeteners. Approximately 2.3 MMT of imported corn were used for
poultry, 1.2 MMT were used for ruminants and 400,000 MT were used for
the starch industry in MY 2003/04. This trend is expected to continue in
MY 2005/06. The poultry sector exhibited a slight decline in corn usage
in MY 2004/05, however, corn use has increased dramatically in feed for
modern dairy farms and beef and buffalo fattening operations.

[]{#__RefHeading___Toc98136347 .anchor}Trade

Egypt\'s total corn imports for MY 2004/05 are expected to increase by
approximately five percent. The U.S. market share of Egyptian corn
imports in MY 2003/04 is estimated at 81 percent; Argentina supplied the
remainder. The large U.S. market share is mainly due to the availability
of high quality American corn at competitive prices. This trend is
expected to continue in MY 2004/05 and 2005/2006. From the beginning of
MY 2004/05 (October 2004) through the end of January, total Egyptian
corn imports are estimated at 1.6 MMT of which 1,458,250 MT came from
the United States; 71,000 from Ukraine; 32,400 MT from Romania; 23,000
from Brazil and 10,300 MT from Argentina. For MY 2005/06, a slight
increase in corn imports is expected. Most industry analysts expect
competition from Ukraine and other suppliers of yellow corn will
continue to be modest this year; the price gap between U.S. and other
suppliers is expected to be marginal.

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

  **Country:**          **Egypt**      Units:             1,000 MT

  **Commodity:**        **Corn**                          

  **Time period:**                                        

  **Imports for**       **MY 2002/03**                    **MY 2003/04**

  U.S.                  2500           U.S.               3148

  Others                               Others             

  Argentina             824            Argentina          758

  Brazil                594                               

  Ukraine               85                                

  China                 52                                

  China                 34                                

  South Africa          16                                

  Urgway                12                                

  Germany               6                                 

  Bulgaria              3                                 

  Russia                3                                 

  **Total for Others**  1629                              758

  **Others not listed** 21                                

  **Grand Total**       4150                              3906
  --------------------- -------------- ------------------ ----------------

## 

## 

  ----------------------- ----------- ------------- ------- ------------- ------- -------------
  Rice PSD Table                                                                  

  **Country:**            **Egypt**                                               

  **Commodity:**          **Rice,                                                 
                          Milled**                                                

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

                          Old         New           Old     New           Old     New

  **Market Year Begin**               **01/2003**           **01/2004**           **01/2005**

  Area Harvested          615         630           647     635           0       640

  Beginning Stocks        342         765           720     456           0       200

  Milled Production       3900        3900          4225    3930          0       4000

  Rough Production        6000        6000          6500    6047          0       6150

  Milling Rate(.9999)     6500        6500          6500    6500          0       6500

  TOTAL Imports           0           0             0       0             0       0

  Jan-Dec Imports         0           0             0       0             0       0

  Jan-Dec Import U.S.     0           0             0       0             0       0

  **TOTAL SUPPLY**        4242        **4665**      4945    **4386**      0       **4200**

  TOTAL Exports           550         579           700     770           0       550

  Jan-Dec Exports         550         579           700     770           0       550

  TOTAL Dom. Consumption  3300        3630          3325    3416          0       3250

  Ending Stocks           392         456           920     200           0       400

  **TOTAL DISTRIBUTION**  4242        **4665**      4945    **4386**      0       **4200**
  ----------------------- ----------- ------------- ------- ------------- ------- -------------

Production

Rice is a major summer crop in Egypt, occupying 10 percent of Egypt's
total crop area. All of the rice crop is irrigated. Rice requires a
special irrigation regime and its cultivation is largely restricted to
the northern part of the Delta. It is often planted on reclaimed land
where the soil is fairly saline and has varying degrees of productivity.
A limited amount of rice is also grown in the middle Delta and in Upper
Egypt. With irrigation water provided free of charge and a much higher
profitability of rice cultivation compared to other traditional summer
crops (i.e. corn and cotton), farmers normally exceed the area targeted
by the government for rice cultivation, despite the prospect of fines of
LE 600/ feddan for those who violate their targeted areas. The
government rarely imposes this fine on farmers.

The total rice area for the CY 2004 is estimated at 635,000 HA, nearly
one percent higher than CY 2003. However, following a sharp decrease in
cotton prices in MY 2004/05, a further increase in rice acreage is
expected for CY 2005. Some farmers are expected to replace cotton with
rice production. Total rough rice production in CY 2004 is estimated at
about 6 MMT. For CY 2005, total rough rice production is expected to
increase to 6.15 MMT.

The medium grain "Japonica" variety comprises approximately 85 percent
of the rice crop and is preferred by Egyptian consumers to the
higher-yielding, long grain "Phillipini" variety. The government's
policy is aimed at producing new varieties with higher yields, a shorter
period of maturity and more resistance to insects and diseases in order
to save 3 billion cubic meters of irrigation water annually for its
ambitious land reclamation projects in the south of the Nile valley
(Toushka). The Rice Institute of the Ministry of Agriculture has
developed several new rice varieties with an average yield of 14 MT/HA,
or about 40 percent higher than the average yield of the traditional
varieties. The Ministry of Agriculture estimates that the new varieties
are being used in close to 90 percent of the total rice area during CY
2004. The government's objective is to have the entire rice area planted
with high yielding, short period of maturity varieties by the end CY
2005.

# 

Trade

Egypt is a net rice exporter. Small quantities of high quality
name-brand rice are imported by up-scale supermarkets. It imports a very
small quantity of high quality name-brand packaged rice to sell in
up-scale supermarkets. Rice exports are estimated at 770,000 MT during
CY 2004. However, for CY 2005, Egyptian rice exports are expected to
decrease to 550,000 MT. This expected decrease in rice exports is mainly
due to the recent decrease in the exchange rate between the Egyptian
pound and the U.S. dollar of about 9 percent. As a result, Egyptian rice
export prices are becoming less competitive in the international market.
The current average export price for medium and short grain is \$350 and
\$333/MT/FOB, respectively. This compares to \$300 and \$283/MT/FOB for
medium and short grain, respectively, during the MY 2003/2004 season.

  --------------------- -------------- -------------------- --------------
  Export Trade Matrix                                       

  **Country:**          **Egypt**      Units:               000MT

  **Commodity:**        **Rice,                             
                        Milled**                            

  **Time period:**                                          

  **Exports for**       **2003**                            **2004**

  U.S.                                 U.S.                 

  Others                               Others               

  Turkey                130,915        Syria                188,266

  Syria                 124,157        Romania              64,098

  Libya                 73,791         Turkey               59,175

  Romania               34,201         Jordan               44,281

  Jordan                33,738         Sudan                43,890

  Sudan                 30,352         Singapore            42,983

  Lebanon               15,853         Lebanon              26,984

  Taiwan                7,049          Saudi Arabia         19,205

  U.K                   5,021          Taiwan               18,436

  Bulgaria              4,724          U.K                  6,544

  **Total for Others**  459801                              513862

  **Others not listed** 118,841                             256,426

  **Grand Total**       578642                              770288
  --------------------- -------------- -------------------- --------------

[]{#__RefHeading___Toc98136351 .anchor}

Stocks

Stocks for CY 2004 are down as a result of a dramatic increase in
exports. However, stocks for CY 2005 are expected to increase given the
anticipated drop in exports a direct result of an increase in the value
of the Egyptian pound against the dollar. It is estimated that current
stocks stand at 200,000 metric tons.

#