Egypt’s new grain security strategy put to test as Ukraine war enters second year

Al-Monitor Pro Members

Marc Español 

Journalist covering Egypt and Sudan

March 31, 2023

In mid-February, Cairo notified UN Secretary General Antonio Guterres of its decision to withdraw from the Grains Trade Convention, set up in 1995 to improve cooperation between exporters and importers. The exit from the group, of which Egypt had been a member since its establishment, was prompted by what authorities see as its inability to control the grains market amid high volatility and to stop paying its dollar-denominated fees at a time when the country is facing serious liquidity issues. Yet the move also comes as part of the new strategy on grain security that is being pursued by the government in the wake of Russia’s war in Ukraine, which prior to the invasion supplied almost half of Egypt’s total wheat needs. So far, the country has managed to navigate the storm, but external and internal risks remain that could jeopardize its fragile balance. The next big test will be the local grain harvest season, which is set to begin this April. 

Scenario 1: New external shock compromises Egypt’s grain security 

Global grain trade could suffer new major disruptions if at some point Moscow decides not to extend the Black Sea Grain Initiative. Meanwhile, world wheat production in 2023 is set to be the second-highest on record, but it will be lower than last year and much of the decline will come from Ukraine and Russia, two of Egypt’s main suppliers. 

Egypt’s short-term options in the face of such shocks are limited. Increased procurement of local wheat is unlikely to meet the state’s most ambitious targets. Looking overseas, if the government wants to further diversify its suppliers, it will have to turn to more distant countries and assume higher costs at a time when it is facing serious liquidity problems. 

However, at the beginning of March Egypt had enough strategic wheat stocks to cover just over 4.5 months of demand, and this year’s local harvest, which runs from April to June, is set to increase, providing the country with a solid short term buffer. 

Scenario 2: Domestic financial troubles compromise the country’s grain security 

Food subsidies, in particular for bread, and the purchase of wheat and other grains from abroad are putting increasing pressure on Egypt’s coffers at a time when the country is in the midst of a financial crunch. For the next FY 2023/2024, the government has already announced that it will have to increase food subsidy allocations by 20% in order to sustain the scheme. 

The economic crisis unleashed in Egypt by the war in Ukraine, which has pushed inflation to five-year highs, has led the government to shelve previous plans to reduce or remove bread subsidies, seen as a matter of national security. But if its financial position does not start to improve soon, the state will find itself increasingly struggling to shoulder the cost. Still, Cairo has proven very adept at securing outside funds to sustain the scheme for now. 

Marc Español has been reporting on Egypt since 2017, with a focus on the economy and the human rights situation in the country. He has been a contributor to Al-Monitor since 2018 and his work has appeared in other publications such as El País and the think tanks Fundación Alternativas and the European Institute of the Mediterranean (IEMed).