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SUGAR CONTINUES UPWARD MARCH
BY MAGDY SAMAAN
Egyptian food industries and businesses are bracing
themselves for a continued rise in sugar prices as the commodity
leapt to around £E 3.50 per kilo in April. The hike, which
has been attributed to rising prices on the international market
and a widening gap between local production and consumption, looks
set to continue throughout the year.
Sugar prices have risen over 60 percent since the beginning of the
year, when sugar was selling for £E 2.15 a kilo. In recent
months, the price hike was exacerbated by concerns over dwindling
inventories, as well as preparations for last month’s Moulid
Al Nabi (birthday of the Prophet) vacation. Every year during the
celebrations, Egyptians typically buy large quantities of sweets,
which causes sugar consumption to spike.
But Minister of Trade and Industry Rachid Mohamed Rachid was quick
to dispel worries, assuring worried citizens that Egypt’s sugar
reserves were sufficient to meet domestic consumption needs until
the end of 2006. He blamed the hike on the rising international
market price, which currently stands at about $480 per ton, citing
a recent decision by the EU to shelve subsidies afforded to its
sugar cane farmers. He also said Brazil, the world’s leading
sugar producer, was reducing exports to push for ethanol and electricity
production using sugar, in response to rising crude prices, which
reached record-highs in mid-April.
Industry analysts are concerned with the country’s need to
address a growing gap between production and consumption. Egypt
produces around 1.3 million metric tons of sugar a year, which covers
about 65 percent of domestic demand. In 2005, it imported 905,000
metric tons at a cost of $450 million to cover its shortfall.
Mostafa Zaki, head of the importers branch of the Cairo Chamber
of Commerce, says Egypt needs to increase the cultivation area of
cane and beet sugar, and build more refineries, to cope with ever-increasing
consumption. But he says a lack of suitable land for sugar cane
plantations has thwarted attempts to increase domestic production.
Much of Upper Egypt’s water-thirsty sugar cane plantations
were cut down in the 1990s by security forces hoping to flush out
Islamist terrorists that had been using them as cover for attacks
on police and tourists.
The government is encouraging farmers to increase the cultivation
of red sugar beet, a more robust variety that already accounts for
nearly 20 percent of Egypt’s total domestic sugar supply. Zaki,
however, admits it is not the most cost-effective solution to the
shortage. “Really, the only way to increase production is what
one refinery, Delta Sugar Company, already does – that is to
import raw sugar and refine it in Egypt. This method saves about
a quarter of the price.”
While the state’s dominance of the sugar market is considered
a major impediment to its development, suggestions of privatization
have been equally unpopular. Minister of Investment Mahmoud Mohieldin
was jeered by lower income consumers last year when he announced
plans to privatize several refineries and mills. He has since backed
away from the plans.
Zaki believes privatization would make Egypt’s sugar prices
subject to world market fluctations and almost inevitably push them
higher. Instead, he thinks the government should privatize only
their administration.
Despite the government’s efforts to cushion the blow by raising
prices incrementally over recent months and bringing more of the
commodity onto the domestic market and into state-owned cooperatives,
the food industry and small businesses are already feeling the burn.
As the price of sugar has risen, food producers have taken steps
to lower their bottom line. Some sweet and jam factories have lowered
the packaged weight of some products by as much as 50 grams to offset
the rising costs of ingredients. Supermarket owner Mamdouh Abd Al
Azeem says this could help keep the prices of these products manageable
for consumers, who have expressed concern about rising prices.
“It’s a real shame,” complains Ali Abdel Rehem, 56,
“becaue the only treat for the average Egyptian is a good cup
of sweetened tea.”
Additional reporting by Amena Bakr
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