Agriculture remains one of Egypt’s most important sectors and continues to achieve steady growth rates of 3-4% per year.  The agriculture sector contributes roughly 16 percent to Egypt’s GDP, but this share has declined in the recent two decades and is expected to continue to fall in the future.  Similarly, the number of Egyptians employed in the sector has fallen from about a third of the labor force in the early 1990s to just over a quarter in 2006.  The challenge for Egypt is to maintain and expand agricultural production for domestic and export markets while at the same time adding value and employment through the development of more agriculture-based processing activities. 

Egyptian subsidies on agricultural production are modest and well below levels allowed under its WTO commitments.  The government still maintains price controls on a number of agricultural commodities including cotton, wheat and sugar cane.

Productivity gains since the mid-1980’s achieved through long-term government commitments to policy reform and liberalization, coupled with assistance from donors (particularly USAID), have helped sharply increase grain and vegetable production, closing the gap between domestic food supply and demand. Wheat production was 8 million tons and rice production was 6.3 million tons in 2005.  Egypt continues to encourage wheat production by paying high prices to local producers.  The 2006/07 wheat procurement price is LE 1,166/ ton ($204 per ton), compared to LE 1,100/ ton ($188 per ton) in 2005/06.  The total quantity of locally produced wheat sold to the Ministry of Supply in 2005/2006 was 2.5 million tons.  For the 2006/07 crop, the General Authority for Supply Commodities (GASC) plans to purchase 3 million tons. 

Egypt has one of the highest wheat per capita consumption levels in the world (180 kg). Total consumption of wheat in 2005/2006 is estimated at 13.9 million tons, including nearly 7 million tons of imported wheat.  In 2005/06, the Ministry of Trade and Industry (GASC) purchased 3.65 million tons of imported wheat and 2.5 million tons of locally produced wheat to produce 82 percent extraction flour used to make subsidized “baladi” bread.  The subsidy on “baladi” bread cost the government close to LE 3.8 billion last year. The private sector imports about 2 million tons of wheat annually, which is used more in the production of high quality flat bread and European type bread, pastries and pasta. Most of the domestic wheat crop is sold directly to consumers or retained by farmers for on-farm consumption.

Egypt is an important cotton producer, with output around 210,000 tons annually.

Egypt produces about 5.9 million tons of corn annually, and is expect to import about 4.5 million tons in 2006.  The majority of the local corn crop is utilized for animal feed (mostly consumed on farms), with about 1.5 million tons used for food purposes (either milled or consumed fresh).  Large commercial end-users and feed mills rely on imported yellow corn to meet requirements. About 500,000 tons of locally produced white corn is delivered to the Ministry of Supply for the production of subsidized baladi bread.

The South Valley Development or “Toshka” project, located in Egypt’s far south, aims to irrigate some 500,000 acres of arable arid soil with water from Lake Nasser. Since 1997, the government has been building a massive pumping station and irrigation canals to transport the water for the project. Construction on the project has slowed in the past 3 years, but President Mubarak inaugurated the pumping station in October 2002 and all of its 21 pumping units were installed and tested by the end of 2002. However, few are actually in operation as the water demand for cultivation is still not high. The main canal was completed in 2000. Construction is proceeding on four branch canals of 28 km each, with the first two nearly completed, the third about 50% complete and work on the fourth just begun. Saudi Prince Walid bin Talal’s Kingdom Agricultural Development Corporation (KADCO) owns 120,000 acres, to be managed by the U.S. firm Cadiz/Sun World (which has a 10% investment stake in the KADCO project), and is currently doing field tests on a portion of that land. This private sector project’s aim is to grow fresh fruits and vegetables for export to Europe in the winter months. No other major investors are yet involved, although several Egyptian government-sponsored entities are doing field tests in the Toshka region.

BEST PROSPECTS FOR AGRICULTURAL GOODS & SERVICES:

(Value of U.S. Exports, $Million)
2001-2006

	2001	2002	2003	2004	2005	2006*
Corn	401	381	361	354	365	430
Wheat	387	260	402	426	190	120
Soybeans	44	32	23	41	72	120
Beef	25	22	26	.1	45	80
High Value Products	19	15	11	21	26	30
Total US Ag. Exports	1033	870	975	949	834	980

* Estimate

Source: Ministry of Economy and Foreign Trade (C & F values for imports), Central Agency for Public Mobilization and Statistics.

Principal U.S. Exports to Egypt: wheat, corn, soybeans/meal, vegetable oil and high value products.

Principal U.S. Imports from Egypt: Spices, processed fruit and vegetables, fruit/vegetable juices, and some other high value food products.  The U.S. imports about $45 million in agriculture products from Egypt annually.

1. Corn

Egypt is perennially among the top five markets for U.S. corn exports.  Most imported corn is used to produce poultry feed, but some is used for industrial uses and starch and glucose production.  The U.S. generally has about 80 percent market share.  The other main supplier is Argentina, whose prices are competitive during that country’s harvest season.  While Egypt will remain a key market for U.S. corn, in 2006/07, the Avian Influenza outbreak in the poultry sector is clouding prospects for overall demand growth.

Corn	2001/2002	2002/2003	2002/2004	2004/2005	2005/2006	2006/2007*
Production	6,160	6,000	5,740	5,840	5,860	5,870
Imports	4,905	4,848	3,743	5,398	4,300	4,800
Imports from US	4,283	2,904	3,120	3,738	3,927	4,200
Total Consumption	11,200	10,900	9,200	11,300	10,300	10,600

*Forcast

Source: USDA, Foreign Agricultural Service

2. Wheat

While Egypt remains a key market for U.S. wheat, U.S. market share has declined in recent years due to competitive prices offered from “Black Sea” suppliers, particularly for wheat of lower quality grades.  Local wheat production still has strategic importance for Egyptians and the government encourages wheat production by paying high prices to local producers (LE 1,166/MT in 2006), and by encouraging area expansion and the use of high-yielding wheat varieties.  GASC, under the Ministry of Industry and Trade, imports wheat to make the heavily subsidized “baladi” bread for low income consumers.  In 2006, GASC will purchase about 2.7 million tons of locally produced wheat and in some parts of the country mix 80% wheat flour with 20% white corn flour (the white corn is also purchased locally at a price higher than the international market).  In any given year, Egypt imports just over half its wheat needs.  The 2006/07 wheat crop in Australia is expected to be down considerably due to drought, which should create additional opportunities for U.S. wheat in Egypt.

Wheat	2001/2002	2002/2003	2002/2004	2004/2005	2005/2006	2006/2007*
Production	6,130	6,300	6,443	7,177	8184	8,200
Imports	6,944	6,327	7,295	8,150	7,700	7,000
Imports from US	3,547	860	3,985	1,765	1,181	1,300
Total Consumption	12,750	12,800	13,300	14,200	14,800	15,600

*Forcast

Source: USDA, Foreign Agricultural Service

3. Soybeans

Egypt has no significant production of soybeans.  Historically, Egypt has imported soybean oil/meal.  However, with new soybean crushing capacity, Egypt is expected to purchase more soybeans for local processing rather than importing the two co-products.  As the United States competitive position in soybeans is stronger than in soybean meal, U.S. soybean exports are expected to grow, possibly at the expense of meal imports, which usually come primarily from South American suppliers.  In the past two years, U.S. soybean sales have grown significantly.  Most of the soybean meal produced from processing soybeans is directed to the poultry industry.  

Soybeans	2001/2002	2002/2003	2002/2004	2004/2005	2005/2006	2006/2007*
Production	446	270	243	762	770	800
Imports from US	138	125	71	298	430	500
Total Consumption	256	278	261	756	806	852

*Forcast

Source: USDA, Foreign Agricultural Service

4. Beef

Local production buffalo/beef cattle production covers the bulk of domestic demand, with about 20 percent of consumption met through imports.  Average per capita beef consumption is low compared to other countries, so opportunity for significant growth exists.  Beef is the preferred type of meat in Egypt.  The U.S. exports a limited amount of high-value cuts to hotels and restaurants; the bulk of U.S. beef exports are beef variety meats, particularly beef liver.  Imported beef liver is established as a relatively cheap source of protein.  From the end of 2003 until March 2005, there was an import ban on U.S beef products, which accounts for the negligible U.S. exports shown in the table below.  In 2005, however, U.S. sales of variety meats rebounded to $45 million and will likely set a record in sales in 2006.  With Egypt’s local industry reeling from several disease outbreaks, imports of U.S. beef products are forecast to continue growing in the future.

Beef	2001/2002	2002/2003	2002/2004	2004/2005	2005/2006	2006/2007*
Production	437	442	440	455	508	465
Imports	136	162	123	168	214	225
Imports from US	29	24	25	29	60	.
Total Consumption	573	604	533	569	581	600

*Forcast

Source: USDA, Foreign Agricultural Service

5. High Value Products

With an expanding retail sector, changes in lifestyles, and growing incomes, demand for ready-made high-value food products is strong.  In addition, growing processing and institutional sectors are opening opportunities for intermediate high-value food products, such as dairy products and nuts.  U.S. sales in these areas have grown in recent years, but vast potential still exists.

US Sales of High Value Food Products (USD Millions)

Products	2001	2002	2003	2004	2005	2006**
Tree Nuts	4.7	5.8	4.3	4.4	9.3	9.5
Dairy Products	4.7	1.0	0.6	11.5	8.5	33.0
Fresh Fruit	2.5	2.4	0.8	1.2	3.3	3.0
Processed Fruits and Vegetables	1.2	1.2	1.8	1.3	1.4	1.5
Snack Foods	1.5	1.0	0.9	0.8	0.7	1.7
Other Value Added Products	4.2	3.6	2.5	2.0	2.6	3.0
Total	18.8	15.0	10.8	21.2	26.0	51.7

*Excludes Beef

**Forcast

Source: USDA, Foreign Agricultural Service