The Egyptian government has made a decision to cut the subsidies that the support of exports, including agricultural exports as of the 1st of November, 2024. For the sector of agriculture, the subsidies are reduced from 8-10% down to 2.4-3 percent of the invoiced amount. The most affected agricultural exporters are those who export citrus fruits due to the magnitude of their volumes which reached 2.3 million tonnes during the season estimated as $1.1 billion.
However, Amgad Nessem, Export Director of El Teriak Farms, welcomes this decision with great gratitude. The manager says: “Of course, it isn’t easy to adjust to this change initially, but it’s an excellent decision and can bring lots in stability for the export industry and will solve a lot of the issues or negative consequences caused by these subsidy programs.”
The exporter states: “The first thing to be aware of is the fact that, in a situation of having insufficient reserves of hard currency, specifically the US dollar In the past few years demanded Egyptian importers to get the funds they require to conduct business. Additionally, laws demand that importers have some sort of export-related activity to limit the loss of their hard currency reserves. Numerous importers began exporting agricultural goods, particularly citrus, due to the massive volumes involved, and the fact that their exports have remained steady even through world crises like the coronavirus.”
“You are able to imagine the effects of the emergence of companies that are a parasite on the business,” Amgad adds. A lot of them have no care about the nature of the oranges, or even the packaging certainly not for the price. The exports they make have no income margins, depending solely on subsidies for exports to get the money they need to purchase. Apart from the 8% tax subsidy that they receive, they do not have to pay the bank commission of 5% for obtaining dollars. This brings the profit up to 13% despite absolutely no profits from the trade. It is possible to claim that can be as high as 10 percent of the production! Exporting fresh produce and citrus is primarily an economic activity for the company.”
In the wake of a significant decrease in export subsidy, this program is now too hazardous and not appropriate for those “parasitic actors” in the manner Amgad says. “These invaders of the agricultural export market will either go away this season, or change their procedures, and that’s great news since they’ve been detrimental to the sector. In addition, the subsidies is now contingent by the surrender of 50 percent of earnings from foreign currencies, as a substitute for Egyptian pound to banks. This is going to bring a lot of stability to the market as it will make it less attractive to traders looking for opportunities and will also bring advantages for the economy overall.”
According to Amgad immediately resulting from the reduction of export subsidies, particularly in particular, the citrus fruits include a drop in the export volume as well as an increase in price as well as a reduction in the gap in prices between exporters. He explains:
“There is likely to be lower exports, at the very least towards the start of the season. This will be a problem for markets where they used to purchase Egyptian oranges for a low price. In particular, I’m thinking about Saudi Arabia and, by extension, also the Gulf markets. You can observe this today: Usually prior to the beginning of the campaign, a lot of ferry boats headed for Jeddah would be waiting within Egyptian ports and wait for the day when they could be loaded by Egyptian Navel citrus. We haven’t been able to see a great deal of these. It is a chance to increase the value of Egyptian citrus in these markets in similar fashion to how the market with Morocco and South Africa valorizes its oranges.”
The exporter adds, “The pricing of oranges will be more accurate and transparent and will not be in any way influenced through subsidies. It will not be a price-cutting and no more discrepancies between exporters. In the past, prices in the market for Navel oranges with the same in quality could reach $50 for a ton, in spite of the reality that the waxing and packing cost are essentially similar across Egypt. In the coming season so, the differences in price will be very minimal and it will be a battle in the area of quality.”
A reduction in subsidy payments could contribute this year as well as other reasons contributing to the rise in Egyptian prices for oranges. According to Amgad The revised Global Gap requirement is equally significant. According to him “Now If you wish to sell oranges in Europe you must grow your crop on property you own as well as with an audit at the time of harvest. This will reduce the number of companies competing in the European market. This, coupled with lower inflation and subsidies has raised the farm gate cost of oranges, to EGP 8-9 per kilo prior to the beginning of the season, to EGP 16 by the beginning of this season.”
The reduction of subsidies can enhance the quality of orange exports, according to Amgad. “Even those markets in which Global Gap is not required like Eastern Europe, the withdrawal of traders who are opportunistic will definitely enhance the quality of oranges and restore the image that is associated with Egypt. Egyptian origin.These markets are tired of receiving inferior oranges, or poor pallets or packaging and are likely to tighten the quality controls. I am confident that the exact markets will see claim numbers drop dramatically as of this time of year.”
Amgad concluding: “All in all, we’ll need to change to the changing environment, and will undoubtedly have a decline in exports however, that’s the cost we’ll have to bear to build a more robust, steady sector. These issues won’t be solved, but it’s best to take a step in the good of Egyptian economy, and also the desire of serious and genuine participants, be it within Egypt as well as in the destinations nations of Egyptian fresh fruits and vegetables.”
More information is available here:
Amgad Nessem
Elteriak Farms
Tel: +201 207 976 920
Email: [email protected]
www.elteriakfarms.com