What Is The Egypt Wheat Trade Problem All About?
Egypt has been in strife with private traders in the country from last many years over the nature of wheat cargoes they import from Russia, France, Romania and other wheat exporting nations.
Authorities often accuse wheat traders for violating the contract which states no shipment of wheat contaminated with Ergot Fungus should be brought to the country.Some wheat traders were even blamed for issuing forged quality Certificates to Russian wheat providers.
Former President of Grain and Feed Trade Association (GAFTA) Mr. Ashraf Al Ettal however believes that allegations leveled by Egyptian Government on wheat traders were false. He said there is significantly more to this than meets the eye.
“The negative effect of these allegations debilitates traders from trading in Russian wheat which is least expensive in the world,” said Ashraf Al Ettal.
As told by this famous Egyptian trader, the tension over wheat trade often results in cancelation of shipments and the halt in the trade causes economic loss to traders. He said the issue over wheat amongst Russia and Egypt is ending up "too much political.And, private traders were being made scapegoats for the entire issue.
“Egypt Government's claim was punctured by a report in 2010 that revealed wheat shipment held at Safaga port was fit for human utilization. The report was published by the leading national and international newspapers,” said Ashraf El Attal.
“The allegation of issuing forged quality certificates to Russian wheat providers by some Egyptian wheat traders proved wrong in the end and Government had to back down on charges,”this popular Egyptian trader added.
Significance Of Wheat For Egyptian People
Egypt is the most populous Arab nation and the second-most populous African state. Egypt's General Authority for Supply Commodities (GASC) buys around 10 million tonnes of wheat in a calendar year to supply the subsidizedbread program to its 83 million population.
Subsidized bread is the most important thing the government gives to the people,” said Ashraf Al Ettal, former GAFTA president.
Whatever may be the reason behind the deadlock in wheat trade between Egypt and its Wheat exporting countries, whenever there has been some issue, each time it has prompted serious food crisis in the nation.
The failure of Egypt to meet the food needs of its people with its own strategic wheat reserves created a situation in 2011 that led to the dethronement of Husni Mubarak, the then leader of Egypt.There were widespread protests everywhere in the country that ultimately led to a revolution.
An attempt to lift the subsidy was made before in 1977 by the then Government. The attempt resulted in deadly riots throughout the county.The intensity of the riots was so high that Authorities were forced to back down and take help of the army to maintain order in major cities of the country.
"It was a very sensitive issue and the administration was forced to act quickly to calm and reassure people. It was not about garnering votes in elections, it was about social unrest,” said a wheat trader in the country on the basis of anonymity.
What If Russia And Other Countries Block Wheat Supply To Egypt?
When Russia was undergoing a severe drought period in 2010, it stopped exporting wheat to Egypt. The benchmark prices of the wheat surged above 50 percent which leads to a severe food crisis in the country.
It triggered wheat shortage and demand for subsidized wheat bread increased in Egypt. The resulting food shortages led to widespread protests in entire Egypt.The Egyptian authorities had to face severe criticism from the countries around the world.They were blamed by international bodies of letting their own people go hungry.
The crisis intensified in 2011 when a 20-year-old boy died because of a heart attack when he was waiting in a bread line outside a bread shop.Although Authorities claimed the boy died because of a heat stroke, the Egyptian national media in its reports termed him thevictim of a food crisis in the state.
The incident took place in the month of Ramadan when the demand for baked sweets and bread in the country remains at an all-time high in the country.
This one incident signifies how important wheat is for the people in Egypt and what impact a trade deadlock can have over the nation.
Is It Possible To Bring Down Ergots In Wheat Shipments To Zero Level?
Many Russian officials openly dismiss this concern of Egypt that they export poor quality wheat to Egypt. They say Egypt has no plans to stop importing Russian wheat or change quality specifications.
Near them, the decision of Egyptian Government in 2017 to reinstate previous zero-tolerance level for the ergot fungi in imported wheat shipments was an attempt to force Russian suppliers to sell it wheat at lower prices.
Russia is one of Egypt’s top export markets for citrus fruits. Egypt sold some $360 million tonnes agricultural products last year to Russia. With 400,000 tonnes, orange was the main fruit it exported to Russia in 2017.
In 2017, Egypt had to back down immediately from tough restrictions on wheat imports when Russia decided to stop the importation of citrus fruits from the country on sanitary grounds.
For Egypt, this retaliatory measure taken by Russia carried serious political and economic implications and came at a delicate time for a government already accused of corruption and ignoring the needs of the poor.
Egyptian wheat traders sharing their concerns said that guaranteeing zero ergots in wheat shipments is impossible, so attempt to pressurize Russia won’t create any impact on the ground.
Political commentator and poet Farouq Gweidah wrote in a daily publication that the crisis dies to Russian grain ban exposed Egypt’s failure in making country self-sufficient in food. According to him, there should be state policy on growing certain strategic crops.
What Is Egyptian Government Doing To Make Egypt Sufficient In Wheat?
Egypt’s ambition to transform the nation into global commodities hub has not so far yielded any convincing results to attract global companies. The multinational companies that are key to the project’s success say the terms of the project are not clear.
The plan was devised to process and re-export 60 million tonnes of wheat, sugar, soya bean and many other commodities.The industry experts and wheat traders in the countrysay the authorities should have consulted them on a range of complex issues if they were really ambitious to make the plan a grand success.
“Project has not been fully researched.The over-ambitious authorities in the country should have taken this factor into consideration that the nation is still struggling with the basics. And they should have rather given emphasis on improving wheat storage capacity and transport system in the country,” Ashraf El Attal.
The hardest plague to eradicate in the country, though, has been the much deep-rooted corruption. To end the corruption, in 2015, the smart card system was introduced in the country.
Though authorities claim that the introduction of smart card system in the country has been a big success saving millions of dollars, reducing dependence on imports and ending wheat shortages, industry officials and traders believe the reforms taken have failed terribly – and even made abuse of the system worse.
The system card system has been compromised, the Supplies Minister Hanafi recently acknowledged it in an interview given to international news agency Reuters.
According to data the consumption of wheat in the country till the introduction of smart cards was750, 000 tonnes, which went up to 955,000 tonnes in 2017.
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