The government has raised the price for wheat paid to Egypt’s farmers to LE1,250 per ardeb (150 kg), up by LE250 to incentivise them to increase the amount of land planted with the crop.
It announced late last year that it was planning to buy wheat for LE1,000 per ardeb in the new 2023 season to encourage the country’s farmers to grow more wheat.
The move led to an increase in the amount of land planted with wheat between mid-November and mid-December — the wheat cultivation season — from 3.4 million feddans in 2019-2020 to 3.65 million feddans last year, according to Hussein Abu Saddam, chair of the Farmers Syndicate.
Increases in the delivery price have historically resonated positively with farmers, encouraging them to plant larger areas with the crop.
However, Nader Noureldin, a former adviser to the minister of supply, believes “a fair price for wheat procurement is LE1,800” per ardeb, explaining that “the government decided to buy wheat for LE1,000 in the new season before the floatation of the pound. Today, prices have almost doubled.”
He said that during the last tender to buy wheat from Russia in the previous season, a price of LE12,600 per ton of wheat was paid including the cost of offloading it in Egypt’s ports and transportation. At the same time, the government had bought wheat from farmers in Egypt for LE8,350 per ton.
Challenges facing wheat cultivation in Egypt include the limited amount of land available for agriculture, Noureldin noted. “The state is carrying out land-reclamation plans, but these also depend on the availability of water,” he added.
Another challenge is that farmers sell wheat to the government at a different price than that charged in the free market. Noureldin said that farmers that grow rice face the same problem. “They sell rice for LE6.8 per kg and then buy it for LE18 in the marketplace,” he said.
He added that growing other crops, such as hay, is more lucrative for farmers.
“Pasta factories may also buy a ton of wheat from farmers for LE15,000 because a ton of macaroni is sold for LE20,000 or LE30,000 on the free market,” he pointed out, adding that this was higher than government prices.
However, Abu Saddam does not agree with Noureldin, saying that while the price of a ton of wheat on the international market may reach LE2,000, this was not a fair comparison because farmers in Egypt receive subsidised seeds, fertilisers, and pesticides from the state.
This is in addition to the direct services they receive, such as guidance on how to improve the quality and increase the quantity of wheat, and indirect services, such as subsidised bread.
“Farmers grow wheat because it provides them with a ‘satisfactory’ profit, even if it is not paid at the ‘fair’ international price,” the chair of the Farmers Syndicate said.
The government is successfully and flexibly managing wheat procurement, he added. Following the floatation of the pound, the cabinet announced an increase in the price of the wheat it will buy from farmers. It may raise the price again before the next cultivation season if the international prices of wheat change, he said.
Abu Saddam said it was important that the government set a guide price for selling wheat in the marketplace. If wheat farmers increase their prices, farmers that grow other crops may follow suit, leading to a wave of higher prices across the board, he noted.
“The current price is economically fair to farmers and grants them a reasonable profit. This is evident in the increases in the amount of land cultivated with wheat,” Sayed Khalifa, head of the Agricultural Syndicate, said.
Egypt’s farmers tend to sell their wheat in advance to the government, the biggest buyer of wheat in the marketplace, to guarantee their profit margins instead of risking selling it on the free market and not attaining the profits they want, Khalifa said.
*A version of this article appears in print in the 26 January, 2023 edition of Al-Ahram Weekly.