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Thursday, 5 January 2017

Cabinet approves purchasing domestic wheat at international prices

Gov’t to buy wheat from domestic farmers at international prices: Cabinet has approved a decision to purchase wheat from domestic farmers at the same price as GASC pays for wheat it purchases in international tenders, Agriculture Minister Essam Fayed said, according to Reuters’ Arabic service. The purchase price for domestic wheat will now be set according to the equivalent of the average price paid by GASC in USD for wheat tenders in the two months prior, explained Fayed.

…Prior to the float of the EGP, the Egyptian government was purchasing wheat from farmers domestically at a price slightly above the international market levels at the time, according to the FAO. In November 2015, the government had proposed implementing a similar system to the one the cabinet approved that would have replaced “the procurement price policy with direct subsidies to farmers and the purchasing of the local wheat harvest at the average international price prevailing during the harvest time (April‑June). However, the decision was subsequently reversed and the procurement policy reinstated to encourage farmers to increase the area planted to wheat.” Given that the cabinet is resorting to a system that does not fix prices for farmers (and along with the ongoing absence of any futures market for them to hedge their risks), we wonder: What impact would this decision have on domestic wheat production this upcoming season? This is especially a concern in light of reports that winter wheat sowings in France are edging to their highest in more than 26 years and Russian grain harvests are exceeding market expectation.

The Farmers’ Syndicate and the House Agricultural Committee are putting up a fight: The syndicate head said the state should not have taken the decision if it doesn’t support production, and that flip-flopping on decisions will lead to farmers losing confidence in the government and choosing to plant more lucrative, rather than strategic, crops, according to Al Borsa.

Among the other decisions made during its weekly meeting yesterday, Cabinet has:

  • Voted to double the budget allocation for the General Authority for Supply Commodities to EGP 16 bn from EGP 8 bn post the float of the EGP;
  • Signed off on a presidential decree that allocates 15.35 feddans of state-owned land to the Holding Company for Drinking Water and Sanitation to be used for a drinking water purification plant;
  • Discussed how to simplify procedures for investors in land reclamation and agricultural projects in Toshka;
  • Voted to amend the inheritance law to enforce stricter punishments and heavier fines for anyone who intentionally withholds inheritance from beneficiaries;
  • Approved a KWD 200k facility from the Kuwaiti Fund for Development to fund consultancy services for new solar power facilities and a solar panel plant.

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