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Tuesday, 16 July 2019

Egypt’s new fuel prices are beginning to show their impact on food

The impact of higher fuel prices is beginning to touch food. Exhibit A: The Supply Ministry is studying raising the profit margin of subsidized bread bakeries to offset rising costs incurred by the latest fuel subsidy cuts, Al Mal cited an anonymous source as saying. The government could increase bakers’ profit margin per sack of flour, which is enough to produce about 1,250 loaves, to between EGP 240-260 from EGP 220. Increasing the profit margin would entail lowering the price of the subsidized flour provided to bakers. The bakers believe a fair profit margin is EGP 280 per sack. Supply Minister Ali El Moselhy is set to meet with members of the bakers’ division at Egypt’s chambers of commerce within days to decide on the increase.

Bread will still be sold to citizens at the same price of EGP 0.05 per loaf, so the additional cost burden will be shouldered by the government. It is unclear how much the move would raise the state’s subsidy bill, but the same move last year had led the ministry to pay an additional EGP 5 bn a year on subsidized bread production.

Exhibit B: Sugar beet crops could drop by between 33-50% to 300k-400k feddans in 2020 on the back of the fuel price hikes and challenging market conditions, Agriculture Ministry sources told the newspaper. Sugar beet prices have stagnated at EGP 650 per tonne for the second year in a row, and higher fuel prices will increase the financial pressure on farmers. Sugar beet plantation season begins in August and runs through November before the harvest season in February. Companies last week refused a request by the ministry to raise the crop’s price by EGP 150 per tonne, a move that the government hoped would encourage farmers to plant the crop.

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