Egyptians face record rice prices as cost control scheme ends

Scheme was unpopular among sellers who said they could not make a profit

Rice farmer Ezzat Mostafa, 62, during a season that has been difficult because of a lack of water and adverse weather conditions, in Al Qalyubia Governorate, north of Cairo. Reuters

Egypt has ended a three-month government price-fixing scheme for rice with Ramadan fast approaching.

The decision has left the country's 104 million people contending with record high prices.

Launched in November in a bid to shield Egyptians from the effects of increasing inflation on their most essential food item, the scheme was unpopular among rice sellers who argued the fixed prices were too low for them to make a profit.

A cabinet meeting will be held later this week to determine whether the scheme will be renewed or not, according to a televised statement from Ibrahim Ashmawy, the supply minister’s first deputy.

Egypt’s Supply Ministry said three months ago that sellers must keep the price per kilogram of packaged fine white rice — the most processed variety which therefore involves the most labour — at 18 Egyptian pounds, or about $0.60, or less.

The ministry fixed the price for unpackaged rice, which is of a lower quality due to a less rigorous milling of the grain, at 15 pounds per kilogram, or about $0.50.

The price of a lower quality variety could be sold for 12 pounds or under, the ministry said.

However, the scheme did not yield the results hoped for, Mr Ashmawy told talk show host Lamis El Hadidy on Saturday.

Markets respond to prices

Some of the country’s largest producers, unhappy with the lowered profit margins brought on by the price-fixing, lowered their output and ramped up the production of other, more profitable foodstuffs, Mr Ashmawy said.

A decreased in supply followed, particularly at large chain supermarkets, a fact that was noted on social media by thousands of shoppers.

The reduced supply was exacerbated by disgruntled sellers withholding wares waiting for prices to increase despite repeated threats of prison sentences and large fines, Mr Ashmawy said.

The low supplies made merchants ignore the ministry’s mandate outright and rice was mostly selling for between 21 and 25 Egyptian pounds per kilogram.

“We had reached an agreement with the General Union of Chambers of Commerce on the fixed prices for the agreed-upon period of time,” Mr Ashmawy said.

“Now, apparently, this agreement does seem to have borne fruit in the way it should have done. So now we have to use different regulatory mechanisms to ensure there is enough rice available in stores ahead of Ramadan.”

As supplies dwindled, demand for rice increased significantly as more livestock farmers began to resort to it as an alternative to yellow corn, Mr Ashmawy said.

Yellow corn, an essential component in various kinds of animal feed, has been in short supply over the past year because of tight import controls to limit the outflow of foreign currency at a time when Egypt’s foreign reserves have dwindled.

Egyptian rice farmers. AFP

To remedy the problem, the supply ministry imported 25,000 tonnes of rice this month, Mr Ashmawy said. The amount would be listed on the Egyptian Commodities Exchange so that sellers can buy it there according to market-determined prices without government controls, he added.

More shipments of yellow corn are expected to arrive in Egypt in the coming weeks, which will reduce the increased demand from livestock farmers, Mr Ashmawy said.

Ragab Shehata, the head of the rice division in Egypt’s industries union, speaking as a representative of the private sector, assured Ms El Hadidy on Saturday in a separate phone-in that the price-fixing scheme would not be renewed.

“We expect prices to go up in the coming week or 10 days as the market stabilises, but they should settle at around 21, 22 or 23 Egyptian pounds per kilogram,” Mr Shehata said. “Some companies will most likely price their rice higher, at around 25 per kilogram, because they have loyal customers who seek out their product.”

The private sector will also be ramping up its rice imports in March, Mr Shehata said.

He urged anyone hoarding large stores of rice to sell them now because with the arrival of the imported supplies, prices will decrease and they will lose money.

Discounted rice will remain available at the government's food outlets and their annual Ramadan food drives, which it launched three months earlier than usual this year to ensure lower-income households had more time to stock up.