Major poultry firm sees Gulf aid dampening Egypt food inflation
July 14, 2013
Gulf dollars could provide short term relief to rising food inflation, but it will not address the problems which have plagued Egypt’s economy, an executive at food company Wadi Group, a major poultry and feed supplier, told us. “Gulf money will ease food inflation temporarily, over a 5 to 6 month period,” said Ramzi Nasrallah, chief financial officer at Wadi Group, after data showed Egypt’s urban consumer inflation rose to an annual 9.8 percent in June on higher food prices ahead of Ramazan.
This was up from 8.2 percent in May. Twelve billion dollars in aid from Gulf states has bought Cairo a window of several months to try and stabilise its politics and repair its state finances, but Nasrallah said that many of the problems driving food prices up remain.
Higher financing costs, the weakening Egyptian pound and disruptions and delays in the supply chain including fuel shortages were all contributing to rising food prices, Nasrallah said. “It (Gulf aid) will not solve other fundamental problems in Egypt such as the current budget deficit, mainly caused by the ill-managed subsidy program, and investments and employment … caused by the unstable political situation.”
Egypt has struggled to pay for imports since the 2011 uprising that pushed Hosni Mubarak out of the presidency and drove away tourists and foreign investors, two of its main sources of foreign currency. Egypt imports much of its basic food needs. “Gulf money will maybe bring the price of foreign currency lower and reduce the cost of imports,” said Nasrallah.
Wadi Group, which is privately owned with the majority held by two Lebanese families, owns farmland in Egypt and Sudan. The group produces around 20 percent of the poultry consumed in Egypt and is also the largest supplier of poultry feed, importing around 600,000 tonnes of corn and soybeans per year.
“In the last month-and-a-half the cost of chicken has risen around 20 percent to 18 or 19 Egyptian pounds per live kilo. We are increasing our feed price almost daily because of limited supply,” Nasrallah said, adding that usually feed prices changed every few weeks or every month. “Local transport prices have gone up due to scarcity of diesel fuel, in addition to trucking companies not wanting to transport goods through the desert at night because they were afraid of being high jacked, which has occasionally happened.” The funding crunch has meant that food and fuel importers have drawn down stocks and are importing needs on a hand-to-mouth basis, leaving little wriggle room for delays. Courtesy Reuters
Published in ZaraiMedia.com