Egypt gets tough with farmers amid soaring wheat prices

Under a new law, authorities arrest dozens of alleged grain smugglers, as the country strives to ensure bread supplies

A worker collects wheat from a silo near Cairo. Egyptian farmers must sell 60 per cent of their harvest to the state. Reuters

Faced with record-high wheat prices on world markets, authorities in Egypt are rigorously enforcing a new law designed to ensure local growers sell them 60 per cent of this year’s harvest.

More than 40 producers and middlemen have been arrested in connection with grain smuggling, with another 30 being pursued by the authorities.

Those convicted face a jail term of up to five years and a heavy fine. The wheat and the vehicles used in smuggling will also be confiscated.

The world’s largest wheat importer, Egypt has traditionally gone to great lengths to secure enough wheat to make bread — a staple for most of the country’s 103 million people.

About 71 million Egyptians rely on cheap bread under a state subsidised food card system.

Past attempts to remove bread subsidies have led to riots, leading the government to back down.

Other measures to lessen the subsidy burden have included reducing the size of the standard loaf and excluding millions from the subsidised food card system on the ground that they can afford market prices.

President Abdel Fattah El Sisi last year said it was high time that bread subsidies were removed. But following public opposition, the idea appears to have been shelved.

The disruption of wheat supplies from warring Russia and Ukraine — which together normally account for nearly half of Egypt’s imports — has placed Egypt in a precarious position, forcing it to search for alternative markets and seek ways to grow and procure more wheat at home.

This week, authorities showed just how seriously they take this issue. Officials announced the arrests of 41 people said to have broken a new law obliging farmers to sell 60 per cent of their wheat harvest to the government. Authorities were pursuing 30 fugitives.

The law also bans the transport of wheat without government permission.

Workers collect wheat at the Benha grain silos, in Al Qalyubia governorate, Lower Egypt. Reuters

Those convicted face a jail term of up to five years and a heavy fine.

Meanwhile, the state prosecution and the Ministry of Supply and Internal Trade — which is in charge of food supplies ― are co-operating to bolster “mechanisms” that ensure farmers sell to the state 5.5 million tonnes of wheat from this year’s harvest.

“It is [the co-operation] a contribution towards the protection of the nation’s national food security and the livelihood and food of the Egyptian society,” the prosecution said.

Egypt is expected to harvest 10 million tonnes of wheat this year ― an increase of one million tonnes on 2021.

The government plans to be 65 per cent self-sufficient in wheat in the next few years, as hundreds of thousands of hectares of fresh farmland are added to agrarian areas through mega reclamation projects.

Measures taken to secure the delivery of home-grown wheat to the state this year are costing 36 billion Egyptian pounds (about $2bn), including new financial incentives offered to growers, according to Prime Minister Mostafa Madbouly.

A bakery in Egypt's capital Cairo. Bread prices are subsidised for about 71 million Egyptians. AFP

A significant increase in storage capacity in recent years — 5.5 million tonnes at present compared to only 1.4 million in 2014 — means that Egypt now has enough wheat to meet domestic demand until the end of the year, said Mr Madbouly.

He said on Sunday that Egypt was currently importing wheat at $435 a tonne — compared to $270 on the eve of the Ukraine war in late February.

The government has kept the price of subsidised bread unchanged — 0.05 Egyptian pound for a flat loaf — and providing private bakeries with wheat to stabilise their retail prices.

Global wheat prices have risen by 40 per cent since the Ukraine war broke out, hitting a record high of $456.78 a tonne on European markets this week.

This surge, exacerbated by fertiliser shortages and poor harvests, has fuelled inflation globally and raised fears of famine and social unrest in poorer countries.

India, the world’s second largest wheat producer, has banned exports, further fuelling the crisis.

But the soaring wheat prices are not the only problem with which Egypt is grappling. Rising energy prices, disruption of the global supply chain and higher shipping costs have created double-digit inflation.

Higher inflation has deepened the economic woes endured by most Egyptians since economic reforms were adopted in 2016. These include the devaluation of the local currency by nearly 50 per cent, lifting state subsidies on fuel, key foodstuffs and services and the introduction of new taxes.

With the country recovering from the economic devastation wrought by the pandemic, Egypt has acted swiftly to tackle the fallout from the Ukraine war.

It has banned the export of key foodstuffs, devalued its currency by 14 per cent and opened negotiations with the IMF on technical support and fresh funds.

The country has also secured billions of dollars’ worth of central bank deposits and investments from its Gulf Arab allies.

Egyptian Prime Minister Mostafa Madbouly says measures costing 36 billion Egyptian pounds ($2bn) have been taken to secure the delivery of home-grown wheat to the state. Photo: American Chamber of Commerce in Egypt

President El Sisi said the crisis was “unprecedented”.

Egypt this week lowered its expected gross domestic product economic growth in the fiscal year that begins July 1 to 4.5 per cent from 5.5 per cent, according to a Cabinet statement.

In March, Egypt lowered targeted real GDP growth for the coming fiscal year to 5.5 per cent, also citing the effects of the Russia-Ukraine war.

The fighting has also stopped Russian and Ukrainian tourists who account for more than a third of all visitor from coming to Egypt, dealing a body blow to an industry still reeling from the pandemic.