Egypt makes record local wheat purchase, as subsidy spending soars

Egypt has purchased 4.06 tons of domestic wheat as of last week, announced supply minister Khaled Hanafy. The purchase is the country’s largest on record, and surpasses the government's target of 3.7 million tons.

Hanafy attributed the increase to the government’s decision to announce wheat purchase prices early, encouraging farmers to increase cultivation. The ministry will continue purchasing local wheat until the harvest season ends in July.

In order to support domestic agriculture, the government pays farmers well above market prices for local grain. This year, the government pledged to pay farmers LE420 per ardeb of wheat, which is equivalent to roughly US$367 per ton at official exchange rates.

Meanwhile, global market prices for wheat have ranged from around US$220 to US$270 per ton, depending on the variety.

The reported increase is good news for farmers, but not so good for the treasury — although domestic wheat purchases, which are made in local currency, do ease the demand on scarce foreign reserves.

The news comes at a time when Egypt’s food subsidy bill is growing rapidly. Despite a fall in global commodity prices and claims from officials that a smart-card based bread subsidy scheme has reduced wheat consumption by more than 20 percent, government figures show that spending on food subsidies has increased by 30 percent year-on-year.

As of March, GASC, the government body responsible for supplying wheat and other staple foods at subsidized prices, had received LE21.3 million in government funds, compared to LE16.3 million at the same time last year, according to the Ministry of Finance.