The sugar crisis, which has been casting its shadow for several months over the Egyptian market, has been resolved at last. Now that the government has made sugar available in the Egyptian market, sugar reserves are forecast to increase in the country during the upcoming months of the new fiscal year. This is expected to result in higher sugar imports and more sugar availability in the market. The Egyptian government is now buying at higher prices, encouraging farmers to increase their production in order to avoid another year of short supply.
The annual report, issued by the Global Agricultural Information Network (GAIN) of the US Department of Agriculture’s Foreign Agricultural Services (FAS) for 2017, has forecast that total raw sugar production in Egypt is expected to increase by 7%, or 150,000 metric tonnes (MT), in marketing year (MY) 2017/2018, to eventually reach 2.42 million metric tonnes (MMT).
FAS Cairo attributes this increase to an expansion of the total areas to be harvested, which will be driven by an increase in the government’s supply price.
Total domestic consumption in MY 2017/18 is forecast to increase by 3.3%—that is, to 3.05 MMT, compared to 2.950 MMT in the previous year. Sugar imports are forecast to remain stable at 830,000 MT, while exports are expected to drop by 33% to 200,000 MT.
Current sugarcane cultivation in Egypt
According to the report by GAIN, the cultivated lands are distributed on sugarcane and beet crops.
When it comes to sugarcane, it is widely cultivated in tropical and temperate regions in Egypt, such as Upper Egypt. Sugarcane is planted on a narrow strip of land along the banks of the Nile, and it is specifically planted in spring and autumn. During spring, the crop is cultivated between February and March, while in autumn, it is cultivated from September through October. The crop takes 11 to 12 months to grow.
FAS Cairo forecasts that the cultivated areas of sugarcane will increase by 9% in MY 2017/2018. This means that cultivated areas will increase from 100,000 hectares (ha) to 119,000 ha. These areas are expected to produce about 12.580 MMT of sugarcane.
However, the government’s adoption of a policy to encourage farmers to grow beets over sugarcanes in order to rationalise the use of water has been apparently ineffective. The government’s attractive supply price of sugarcane makes it the cash crop of choice in Upper Egypt; hence, the economy of Upper Egypt is so heavily dependent on sugarcane production that disruptions to the areas planted with the crop would impact the living conditions of 150,000 families that depend on it. Also affected would be a plethora of ancillary businesses including input providers, irrigation providers, logistics, metallurgy, as well as all non-commercial activities, such as education and healthcare. The frame of mind of such an important economic pillar can be summed up by what a farmer remarked to FAS Cairo during a visit to the area: “we grow sugarcane because our fathers and their fathers used to grow it, and we cannot change this.”
Sugarcane refineries in Upper Egypt
There are nine sugarcane refineries in Upper Egypt that have a production capacity of around 10,200 MMT of sugarcane, which requires a total area of at least 120,000 ha in order to operate.
The government has tried implementing policies to reduce the areas cultivated with sugarcane due to the crop’s high water consumption; however, these have been unsuccessful. Policies designed to move production away from sugarcane find themselves squeezed between the hammer of water scarcity and the anvil of sugar processors’ demand for raw material.
Beet production in Egyptian
FAS Cairo forecasts MY 2017/18 sugar beet area harvested to increase by 10%, or 20,000 ha, to reach 224,000 ha. With an increased area comes a concomitant increase in production, expected to reach 9.5 MMT, an increase of 3.4% or 313,000 MT. FAS Cairo estimates the area harvested in MY 2015/16 to stand at 204,000 ha. The increase in the area and the subsequent production is attributed to the increase in government’s subsidised supply price, which will encourage farmers to grow sugar beets over other crops.
Egypt does not produce beet seeds locally because of the requirements of temperature and sunlight. Among other conditions, seed production requires packing the roots at 8 degrees Celsius for three months and daylight duration of 16-18 hours. As a result, Egypt depends on seed varieties imported from Germany, Denmark, Netherlands, France, and Sweden.
FAS Cairo forecasts refined sugar production in MY 2017/18 to increase by 7% or 150,000 MT to reach 2.42 MMT, as compared to the MY 2016/17 estimate of 2.27 MMT. Beet sugar production in MY 2017/18 is forecast to increase by 4% or 50,000 MT, reaching 1.32 MMT as compared to 1.27 MMT the previous year. Sugar from sugarcane is expected to increase by 10% or 100,000 MT to reach 1.1 MMT compared to 1.0 MMT in the previous MY.
FAS Cairo attributes the increase in production to an increase in total area planted in both sugar beets and sugarcane. The growth in planted area is driven by the government’s decision to increase the supply price for sugarcane and beets, which will encourage farmers, especially those who plant sugarcane, to increase their production and deliver it to the mills. In April 2017, two months after the onset of the sugarcane harvest, sugarcane processors in Upper Egypt region reported an increase of 10% in the delivery of sugarcane to refineries as compared to same period in 2016. In MY 2015/16, some farmers preferred to sell some of or all their crops to juice shops and molasses producers because of the higher prices offered, as compared to the government’s supply price.
Sugar production
FAS Cairo forecasts refined sugar production in MY 2017/18 to increase by 7% or 150,000 MT to reach 2.42 MMT, as compared to the MY 2016/17 estimate of 2.27 MMT. Of this total forecast, 1.32 MMT of sugar will be derived from sugar beets, while 1.1 MMT will be sourced from sugarcane. Beet sugar production in MY 2017/18 is forecast to increase by 4% or 50,000 MT, reaching 1.32 MMT as compared to 1.27 MMT the previous year, as mentioned previously. Sugar from sugarcane is expected to increase by 10% or 100,000 MT to reach 1.1 MMT compared to 1.0 MMT in the previous MY.
FAS Cairo attributes the increase in production to an increase in total area planted in both sugar beets and sugarcane. The growth in planted area is driven by the government’s decision to increase the supply price for sugarcane and beets, which will encourage farmers, especially those who plant sugarcane, to increase their production and deliver it to the mills. In April 2017, two months after the onset of the cane harvest, sugar cane processors in Upper Egypt region reported an increase of ten percent in the delivery of cane to refineries as compared to same period in 2016. In MY 2015/16, some farmers preferred to sell some or all their crop to juice shops and molasses producers due to the higher prices offered, as compared to the government’s supply price.
Consumption and trade of sugar in Egypt
FAS Cairo expects total domestic consumption in MY 2017/18 to increase by 3.4% or 100,000 MMT to reach 3.050 MMT. Consumption in MY 2016/17 is estimated at 2.950 MMT. The increase is attributed to the annual population increase. Additionally, Egyptians are expected to increase their sugar consumption to meet caloric needs, substituting sugar for other key commodities, such as poultry and beef, as a result of an recent increase in the price of food.
Egypt continues to provide refined sugar to food subsidy beneficiaries at prices below the free market prices. Egyptian citizen beneficiaries are receiving a monthly cash transfer of EGP 21 ($1.17) per person through a smart card system. A family of four is expected get a monthly cash transfer of EGP 84 ($4.7), enabling them to meet their sugar needs, as well as purchase other food commodities.
In terms of sugar trade, Egypt’s sugar imports in MY 2017/18 are forecast to remain stable at 830,000 MMT. In MY 2016/17, the majority of sugar imports were imported through Holding Company for Food Industries (HCFI) and the Ministry of Defence’s National Service Projects Organization (NSPO). FAS Cairo believes that HCFI and NSPO will continue to lead and import most of the sugar needed to bridge the gap between domestic production and consumption. The devaluation of the Egyptian pound to the US dollar made it harder for importers to buy from international suppliers. According to GAIN’s forecast, Brazil is likely to remain Egypt’s main raw sugar supplier in MY 2017/18, while Sudan and Kenya receive 50% of Egypt’s sugar exports and are expected to remain the main export destinations in MY 2017/18. It is worth noting that Egypt exports sugar to the majority of Arab and some African countries.
