Price incentives on wheat
In a move meant to encourage farmers to increase the amount of land planted with wheat, the government has announced it will raise the price of the wheat it buys from farmers by 13 per cent during the coming season in 2022.
The new prices were decided by the ministries of supply, agriculture, and finance ahead of the cultivation season. In a joint statement, the three ministries said on Thursday that the government would buy an ardab of wheat for between LE800 and LE820 instead of the LE705 to LE725 it used to pay in previous seasons. One ardab is around 150 kg.
The decision is based on the international rise in wheat prices to their highest in a decade. The price of wheat has increased worldwide because of bad weather, hikes in fertiliser prices, and increases in import costs.
Egypt is the world’s largest importer of wheat, paying large sums to import the country’s needs. International tenders this year recorded their highest prices in five years.
Ali Moselhi, the minister of supply and internal trade, said the price the government will pay farmers for wheat would be decided according to international prices in the three months before the harvest season.
He said that farmers would be able to sell their crop for a price 20 per cent higher than last year.
Egypt grows some nine million tons of wheat at present, or 55 per cent of local consumption. The government buys around half this from farmers to produce subsidised bread for ration-card holders, Moselhi explained, adding that there are 71 million card holders in Egypt, each entitled to five loaves of bread a day.
The decision to raise prices would incentivise farmers to grow more wheat, said Hussein Abu Saddam, head of the Farmers Syndicate. He said the price set by the government was equal to international prices and should act as an incentive.
Farmers could make LE11,000 in profit from each feddan of wheat sold, Abu Saddam said. If the international price of wheat increases, the government may have to raise what it pays farmers further, he added.
Egypt’s farmers are not obliged to sell their crop to the government unless they are likely to make profits, he added. Farmers are free to sell their wheat to the government, the private sector, which uses it to make pasta, or to bakeries that produce pastries and sweets.
There are some 3.5 million feddans of land cultivated with wheat in Egypt, with each feddan producing between 18 and 24 ardabs.
Tarek Hassanein, head of the Chamber of the Grain Industry in the Federation of Egyptian Industries, said that the country’s farmers sell 100,000 tons of wheat to the private sector and 3.5 million tons to the government.
He expects that new seeds distributed in Minya and Beni Sweif and grown in the coming season will increase the quality and quantity of the harvested wheat.
The government’s decision to announce an increase in what it will pay for wheat ahead of the harvest season is the result of the international hike in prices, said Amr Al-Hosni, head of the Wheat Division at the Chamber of the Grain Industry.
He said the government should have announced that it will buy wheat from farmers for between LE5,500 and LE6,000 per ardab to match current international prices and expects the government to buy about four million tons of wheat from farmers during the next season, up from 3.5 million tons this year.
*A version of this article appears in print in the 18 November, 2021 edition of Al-Ahram Weekly