Egypt faces rising wheat prices

A baker in the Mokattam district, southeast of Cairo, on March 16, 2022, after the Russian invasion of Ukraine pushed up commodity prices in Egypt.

Since the beginning of the invasion of Ukraine by Russia, on February 24, the Egyptian authorities have multiplied reassuring messages about their wheat supplies, as well as measures to avoid shortages. Egypt, the largest importer of wheat in the world, with the Black Sea as its main source, is particularly exposed to this basic product that forms the basis of the diet of its 105 million inhabitants.

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Between its strategic reserves and the local harvest due to start in mid-April, Cairo says it has enough stocks until the end of 2022. But the country is already feeling the brunt of rising food and energy prices. Heavily indebted and weakened by the Covid-19 pandemic, Egypt has once again requested assistance from the International Monetary Fund (IMF), the institution confirmed on Wednesday, March 23.

“Egyptians consume twice the world average of bread, and the government already subsidizes the price of wheat for this bread to the tune of $3.3 billion. [3 milliards d’euros] per year before the Russo-Ukrainian war, the threat of rising wheat prices to the Egyptian budget is real”, analyzes Michaël Tanchum, associate researcher at the European Council on International Relations and the Middle East Institute (MEI) in Washington. Egypt needs about 10 million tons of wheat a year to provide 72 million people with subsidized bread.

Temporary export ban

In 2021, the State imported more than 6 million tons and the private sector more than 12 million. More than 80% of these imports come from Russia and Ukraine. Before the war, the price of wheat was already moving at a record level. In the second half of 2021, prices increased by 25% due to global supply chain disruptions, poor crop yields, and hoarding of wheat and other grains by some countries, notably China.

“That storm turned into a tsunami with Russia’s invasion of Ukraine, sending wheat prices up 75% in just two weeks.”, continues Mr. Tanchum. On March 6, Finance Minister Mohamed Maeit reported that the state’s wheat bill had already increased by 15 billion Egyptian pounds (LE), or 744 million euros. Cairo plans to diversify its offer, particularly in Europe and America, and above all to increase the local share.

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The objective of the Ministry of Agriculture is to buy 6 million tons locally in 2022, against 3.5 million in 2021. A temporary ban has been decreed on exports of wheat and other basic crops. In mid-March, authorities also forced local growers to sell part of their harvest to the three state-owned companies. Violators face a five-year prison sentence. As an incentive, the Ministry of Agriculture increased the purchase price per ton of wheat to LE 5,900.

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