Egypt's 2003-04 Oilseed Production Down 26%
Chicago, May 18 (OsterDowJones) - Egypt's total oilseed production in MY2003-04 decreased by about 26 percent due to a significant decrease incotton area. Oil meal consumption decreased by 15 percent in 2003 comparedto 2002,but vegetable oil consumption in 2003 increased by 14 percent due to asubstantial increase in palm oil imports, according to a U.S. Departmentof Agriculture attache report issued Tuesday and posted on the ForeignAgricultural Service Web site.
Area Planted and Yields
Cottonseed, by far, continues to be the major oilseed crop in Egypt and itis looked at as a byproduct of cotton production. Soybeans and sunflowerare the other oilseed crops. Sunflowerseed decreased from about 1,400 HAin MY 2002 to about 1,100 HA in MY 2003. However, the area for soybeansexperienced a substantial growth in MY 2003 compared to the previous year.The area dedicated to soybeans increased from an estimated 6,000 HA in MY2002 to 8,000 HA in MY 2003. This increase mainly came as a result ofcultivation in newly reclaimed lands in the desert. Despite this increase,the production of both soybeans and sunflower continues to be marginal dueto low yield and the availability of competitively priced imports. As aresult, farmers tend to plant alternative crops.Both cotton area and cottonseed production decreased substantially inMY 2003/04 (by 26.5 and 24 percent, respectively) as compared to the areaplanted and production in MY 2002/03. However, substantial increase isexpected in MY 2004/2005 for both cotton area and cottonseed production .This substantial increase is mainly attributed to substantial increase inthe MY 2002/2004 local cotton prices, which jumped from LE 500 to LE 1100per Kentar (1 Kentar = 50 Kg). This encouraged farmers to plant cottonrather than other summer crops such as corn and rice. As a result, alarger cotton crop is expected in the MY 2004/2005. Industry sourcesestimate that cotton production may go up to 274,000 MT (6.5 millionKentars) or about 44 percent higher than the MY 2003/2004 cottonproduction.
Consumption & Utilization
Egypt's annual oilseed crushing capacity is currently estimated at 1.2million tons per year, but most crushing facilities are outdated. About 75percent of this capacity is controlled by six public sector companies. Theremaining share is controlled by private sector firms. Six public sectorcompanies produce oil, feed, soap, and vegetable ghee. The largestcrushing plant is in Damanhour with an annual crushing capacity of about100,000 MT of beans while the rest of the publicly-owned companies have acombined annual crushing capacity of about 60,000 MT. Public sectorcompanies do not import soybeans directly, but purchase their requirementsfrom the local market.The only major private sector crushing facility currently operating inthe country (Alexandria Seed Company) has an existing crushing capacity of210,000 MT annually. This company is adding an additional crushingcapacity of 2,000 MT per day. The company expects to complete thisexpansion during the last quarter of 2004. Two other major private sectorcrushing facilities (Alexandria and Damietta) are being constructed, butboth companies have run into significant delays, and they are not expectedto become operational in the near future. Another private sector crushingfacility with an annual capacity of 100,000 MT of soybeans and 60,000 MTof cottonseed is operating in Upper Egypt (Minya). Company officialsreport that this facility is currently crushing 20,000 MT of soybeans and35,000 MT of cottonseed.As a result of the decline in total oilseed production and imports,total oilseed consumption in MY 2003/2004 is estimated at about 548,000 MTas compared to 747,000 MT in MY 2002/03.A substantial increase in palm oil imports during the same periodcompensated for the decrease in oilseed production and imports. Totaloilseed consumption is expected to rebound next year due to the followingfactors:1) Substantial expected increase in cotton production in MY 2004/05.2) Anticipated expansion of crashing capacity by private sector firms.In addition in May 2004, the government initiated a new consumersubsidy program for rational cardholders, which commits the government toinclude 30,000 MT of cooking oil and margarine annually for low- incomeconsumers to be distributed to the rational cardholders.
Trade & Price
Egypt has not been a significant importer of oilseeds in recent years.The importation of cottonseed is prohibited because the Ministry ofAgriculture Plant Quarantine officials are concerned about theintroduction of boll weevil and other pests into Egyptian agriculture, aswell as concerns about mixing imported seed varieties with Egyptian cottonvarieties. Sunflowerseed imports in MY 2003/2004 decreased to nil from1,000 MT in MY 2002/03 and this is expected to remain the same next year.In MY 2003/2004 Egypt imported about 220,000 MT of soybeans as compared to289,000 MT in MY 2002/03. Most of this amount was imported by a privatelyowned crushing facility in Alexandria. The decrease in soybeans importswas mainly due to the general economic condition in the country andcontinued devaluation of the Egyptian pound. Theanimal production sector,particularly the poultry industry, declined last year due to substantialincrease in the price of most inputs. Reportedly many poultry farms havehad to either reduce production cycles or close down completely. However,soybean imports in MY 2004/2005, are expected to increase to 300,000 MTdue to the anticipated increase in the existing crushing capacity of theAlexandria plant. This quantity will likely increase further when the newexpansion of this facility is fully completed.In CY 2003, the U.S market share in the soybean import marketdecreased slightly from 59 percent in 2002 to 50 percent in 2003. Theaverage price for U.S soybean during CY 2003 was $260 per MT C&F comparedto $ 245 per MT C&F for Argentina soybean. U.S. soybean exports usuallyhave price advantage during August -January while other suppliers,particularly Argentina, are more prices competitive during Feb-July.
Tariffs
For soybeans, sunflower seed, linseed, palm kernel, and sesame seed,the tariff rate is one percent. For castor seed, copra, and rapeseed, therate is 5 percent. For peanuts, the rate is 30 percent.
Oil meals, Production
Cottonseed meal output in MY 2003/2004 decreased by about 26 percentfrom the MY 2002/2003 level. This decrease came as a result of a decreasein cotton area and production. However, cottonseed meal production in MY20004/05 isexpected to increase by about 50 percent as a result of expected increasein cotton area. Soybean meal production in MY 2003/2004 has decreased to175,000 MT as compared to 247,000 MT in MY 2002/03. This was mainly due toa decrease in imports of soybeans for crushing as a result of the chronicforeignexchange limitations in the banking sector and the continued devaluationof the Egyptian pound. However, in MY 2004/2005, soybean meal productionis expected to increase by about 37 percent due to the expected expansionofcrushing capacity in existing mills.
Meal Consumption
Egypt's total oil meal consumption in 2003 decreased by approximately15 percent from the 2002 level. This is mainly due to chronic foreignexchange limitations in the banking sector and the devaluation of theEgyptian pound. Some livestock and poultry producers had to either reducetheir production or shutdown completely as a result of substantialincreases in the price of inputs particularly animal feed. Most cottonseedmeal production is utilized by the public sector feed mills for theproduction of livestock feed. Soybean meal is mostly utilized in poultryrations (80 percent), and very small amounts of sunflowerseed meal areused in livestock feed particularly in dairy rations. In MY 2004/2005,total oil meal consumption is expected to increase to about 1.5 MMT ascompared to about 1.3 MMT in 2003/04.
Trade and Price
Soybean meal continues to be the major meal imported into Egypt. In CY2003, total soybean meal imports are estimated to be 835,000 MT, or about12 percent lower than the 2002 level. In CY 2003 Egypt imported about2,240 MT ofcottonseed meal from Syria compared to 10,000 MT in CY 2002. In 2003, U.S.soybean meal exports to Egypt decreased by 46 percent and only captured 9percent market share compared to 16 percent in 2002. Brazil's market shareincreased from 3 percent in MY 2002 to 14 percent in MY 2003, whileArgentina's market share decreased to 70 percent compared to 81 percent inthe previous year. Soybean meal imports in CY 2003 are expected toincrease if the current economic situation improves. U.S. soybean meal iscurrently being imported at $ 315 per MT / C&F compared to $214 per MT C&Fin MY 2002/03. Thecurrent C&F price for soybean meal from Argentina isbetween $2 to $3 per MT less than the U.S soybean meal.
Tariffs
Oilseed meal and cake extracted from vegetable oilseeds are subjectedto an import duty of 8 percent plus 2 percent port charges.
Oil, Production
The major edible oil produced in Egypt is cottonseed oil. Domesticproduction of cottonseed oil in 2003 decreased to 50,000 MT from 66,000 MTin 2002 due to the decrease in cotton area and production. Production in2004 is expected to increase to 75,000 MT as a result of the substantialincrease in cotton area for 2004/05 crop. Soybean oil production alsodecreased to 39,000MT in 2003 from 49,000 MT in 2002 due to the decreasein soybean imports. Production of soybean oil in 2004 is expected toincrease to about 54,000 MT with the anticipated expansion in some of theexisting plants. In2003, sunflowerseed oil production decreased to 1,600 MT from 3,200 MT in2002 as a result of the decrease in sunflowerseed imports for crushing inaddition to lower local production of sunflowerseed available forcrushing. IN 2004, sunflowerseed oil production is expected to be 2,400MT. Although there is no local production of palm oil, there are a numberof private sector palm oil processors and distributors in Egypt.Essentially, all palm oil is delivered in refined form and requiresminimal processing before being packaged for local sale.Total Egyptian refining capacity for vegetable seed oils and palm oilis currently estimated at about 1.4 million MT, of which 672,000 MT ispublicly owned and the remaining share is controlled by the privatesector. So far, due to the continued decrease in oilseed availability,both public and private sector companies have been refining imported crudeoils.
Consumption
About 60 percent of the country's total edible oil supply is refinedby The Food Industries Holding Company (FIHC) and destined for humanconsumption. The remaining share is refined by the private sector. Abouttwo-thirds of all palm oil is used for household and institutionalpurposes, and the reminder is used for the production of ghee(shortening). Total vegetable oil consumption in 2003 decreasedsubstantially (by about 27) percent from the 2002 level. While cottonseedoil, soybean oil and sunflowerseed oil consumption decreased by 23percent, 28 percent and 50 percent respectively in MY 2003 as compared to2002. Increased consumption of palm oil (49 percent) compared to last yearcompensated for the consumption decreased in other oils. The decrease intotal oil consumption was mainly due to the lack of foreign exchangeliquidity especially for FIHC (major importer for vegetable oil) inaddition to the devaluation of Egyptian pound which made imports of basiccommodities such as edible oil more expensive.This reflected negatively on the purchasing power of consumers.However, consumption of palm oil increased from 350,000 MT in 2002 to522,000 MT in 2003, mainly due to its relatively cheap prices. Palm oilcontinues to maintain a good market share among other consumed oils, be itfor human consumption or industrial use. Palm stearin is imported mainlyas a substitute for tallow in soap manufacturing.A portion of the vegetable oil consumption in Egypt is subsidized anddistributed through a ration card system. Ration cardholders are allowedonly 0.50 Kg /person/month at a subsidized price of LE 0.50. In May 2004,the government initiated a new subsidy program for ration cardholderswhich allows for an additional 1/2 kg of cooking oil per person per month(with maximum 2 Kg per ration card) at LE 3.5 per Kg, in addition to 2 Kgof margarine per ration card holder per month at LE 9 per Kg. As a result,consumption of vegetable oil is expected to increase during the secondhalf of 2004 and in 2005.The price of oil marketed by private producers has increasedsubstantially at the retail level and currently ranges from LE 6.42 to LE6.75 per Kg. This is compared to a retail price of LE 5.75 per Kg to LE5.50 per Kg in 2003. This increase is mainly due to the devaluation of theEgyptian pound. Ghee produced by the public sector has also increased andcurrently sells at an average price of LE 10.50 per Kg as compared to LE9.50 for 2 Kg tin, while privately packed ghee sells for LE 16 per 2 Kg ascompared to LE 11.75 per 2 Kg during same period of 2003.
Trade & Price
Egypt's consumption of vegetable oils is dependent on trade. In MY2003/04, the availability of these products has been limited as supplieswere continuously short. This was primarily due to both a shortage offoreign exchange availability in banks and decreasing consumer purchasingpower after the devaluation of the Egyptian pound. Total Egyptian edibleoil imports in 2003 decreased by about 32 percent. In MY 2004/2005, totaledible oil importsare to expected slightly increase. In CY 2003, public sector companiesimported about 42 percent of the total vegetable oil that came into thecountry, and the remaining share was imported by private sector companies.Crude sunflower oil is currently being imported at $665 per MT C&F ascompared to an average of $ 590 per MT C&F per MT C&F during 2003. Thecurrent C&F price for crude soybean oil is $610 per MT C&F, compared to anaverage price of $540 per MT during the same period in 2003. Palm oilimports for both direct consumption and industrial uses decreased in 2002.In MY 2003/04, total palm oil imports increased to 522,000 MT from 350,000MT in MY 2002/03.
Tariffs
Tariffs on imported seed oils are as follows: A- Import tariffs onsoybean, Sunflower, cotton and palm oil (whether crude or refined oils inbulk) is 1 percent plus 1 percent sales tax. Import tariffs on refined oilpackaged for retail remains at 20 percent (whether crude or refinedoil).B- For ground-nut (peanut) oil, olive oil, coconut, copra, rape bulkcrude oil, the rate is 5 percent, but if packaged for retail, (or lessthan 50 Kg) the rate is 20 percent.- For linseed oil and jojoba oil crudebulk, the rate is 15 percent, while the rate is 20 percent, if packagedfor retail (or less than 50 Kg).
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