How Egypt plans to expand agricultural output

While many countries with desert climates struggle to establish strong agriculture sectors, it is a critical and successful pillar of Egypt’s economy. The fertile Nile Delta is responsible for the country’s rich natural conditions, and enables it to grow a wide variety of crops, including cereals, cotton, sugar, fruits and vegetables. The sector is further supported by a well-developed network of irrigation and drainage systems, and a long history of traditional farming.

While Egypt’s agriculture sector is well established, the country continues to face challenges related to climate change, urbanisation, a rapidly expanding population, and food and water insecurity. Indeed, the population is set to expand from 103.5m individuals in June 2022 to as much as 160m by 2050, with the number of individuals living in urban areas rising from 40m to 85m over the same period. This underscores the importance of addressing food-related challenges today. To that end, the government introduced several policies to mitigate issues and boost efficient crop cultivation. It has also implemented several new water policies in a bid to minimise waste and alleviate shortages.

Agriculture was among the most resilient sectors during the first year of the Covid-19 pandemic, particularly as farmers were exempt from the lockdown restrictions that were implemented in the early months of the health crisis to stem the spread of the virus. However, some related industries were more affected by the pandemic restrictions and disruptions to global supply chains. For example, the food-processing industry saw a drop in production and a decrease in demand. More recently, the country was among the most affected by the February 2022 invasion of Ukraine by Russia, as it is the world’s largest wheat importer and imports up to 80% of its wheat from Russia and Ukraine.

Structure & Oversight

Several agencies are involved in the oversight of the agriculture sector. The Ministry of Agriculture and Land Reclamation (MALR) oversees the implementation of agricultural policy and manages land-reclamation programmes. It has several strategic priorities, including establishing an inclusive and sustainable framework for rural development, reducing poverty, bolstering nutrition and standards of living, and improving the efficiency of resource use.

Another important player is the Ministry of Water Resources and Irrigation (MWRI). The body is responsible for the construction, operation and maintenance of irrigation and drainage pump stations, and maintains the Aswan High Dam and Aswan Reservoir. It also provides the framework for the distribution and use of water, and conducts hydrological and hydrometeorological studies aimed at achieving optimal usage of water from the Nile River.

The government has several policies in place to address persistent challenges in Egypt’s agriculture sector, including the Sustainable Agricultural Development Strategy 2030, which aims to leverage technology to increase production and the efficient utilisation of water resources. Another key programme is the National Strategy for Adaptation to Climate Change and Disaster Risk Reduction, a multi-sector framework that includes provisions for the sound management of soil, arable land and water, as well as encouraging the use of fertilisers and high-quality inputs such as seeds. These policies aim to tackle long-standing problems associated with water scarcity, rapid population growth and climate change by improving crop productivity, enhancing resilience to water scarcity and climate change, and reducing supply chain losses.

Investment & Contirubution to GDP

The government has invested substantially in the sector in recent years. In FY 2020/21 the government invested LE14.2bn ($902.3m) in agriculture, forestry and fisheries, overtaking the private sector’s investment of LE13.3bn ($845.1m), according to data from the Central Bank of Egypt. The increase of public sector investment over the year well outpaced wider economic growth, at 3.9% and 2%, respectively.

Agriculture has traditionally been a key driver of economic activity. In 1974 it accounted for 28.8% of GDP, but industrialisation and diversification measures caused this figure to steadily decline, to stand at 13.3% in 2010. In FY 2020/21 the sector contributed LE445.2bn ($28.3bn) to GDP, around 11.5% of the LE4trn ($254.2bn) total, putting the country on track to meet its goal of boosting agriculture’s contribution to GDP to 12% by 2024. The Ministry of Planning and Economic Development (MPED) announced the target in June 2021, along with aims to increase the volume of agricultural production by 30% between 2020 and 2050, and the sector’s share of exports from 17% in 2020 to 25% in 2050.

Land & Jobs

Arable land in Egypt consists of both “old” land, or areas in the Nile Valley and Delta, where around 85% of agricultural land is located; and “new” land, or reclaimed desert land. Agricultural operations on the old land mainly consist of smallholder farmers, who grow crops on an average of 5 feddans (2.1 ha). The share of arable land has remained just under 3% of the total land area since the early 2000s, while the percentage of agricultural land reached almost 3.9% in 2018, an increase from 3.3% in 2000. The government aims to reclaim 150,000 feddans (62,500 ha) of land a year by 2030 to expand this figure further. These efforts are supported by high-quality soil, generally favourable climatic conditions, and proximity to markets in the MENA region and Europe, which officials aim to leverage to attract foreign and local investment.

The agricultural sector contributes a large proportion of Egypt’s jobs, accounting for around 20% of total employment in 2019, according to the World Bank. This figure reaches as high as 55% of employment in Upper Egypt, where agricultural work is most prevalent. However, the region suffers from greater levels of food insecurity as around half of Upper Egypt’s population lives below the poverty line.

To help shore up food security, the government began the Tamween subsidy programme, which provides recipients with LE21 ($1.33) each month for goods, in addition to a bread subsidy of five loaves a day. As of November 2021 around 71m people, or around 70% of the population, received subsidies through Tamween. In FY 2020/21 total bread and food subsidy allocation was LE84.5bn ($5.4bn), an increase of approximately 5% from FY 2017/18. These efforts helped to lower the percentage of the population considered malnourished, from 4.4% in 2019 to 4.1% in 2020, according to MPED.

Several international organisations support Egypt’s agricultural sector and rural communities. The UN World Food Programme (WFP) has partnered with the government on several projects, particularly in response to the pandemic. As well as providing cash-based transfers to low-income households across the country, in 2020 the WFP supported the government in efforts to improve the agricultural productivity and livelihoods of approximately 21,000 men and 12,000 women.

The organisation has also funded the adoption of agro-processing technologies, and e-commerce and other digital platforms that support rural communities and agriculture. Working closely with the government, in 2020 the WFP established the Egypt Country Strategic Plan 2018-23, aimed at tackling the underlying causes of vulnerability to food insecurity and malnutrition, in line with the UN Sustainable Development Goals.

Crops

A wide variety of crops are grown across the country, and total production has risen markedly in recent years – specifically, by 20% between 2010 and 2020, according to the UN Food and Agriculture Organisation (FAO). In 2019 the main crops produced were sugarcane (16.3m tonnes), sugar beet (10.5m tonnes), wheat (9m tonnes), maize (7.5m tonnes) and tomatoes (6.8m tonnes). Other popular crops include rice, potatoes, oranges, onions, grapes and dates.

Egypt expected to plant 3.5m feddans (1.5m ha) of wheat in the 2021/22 crop year, relatively even with 2020/21. A November 2021 report by the FAO projected that wheat and cereal output would reach 9m and 23.8m tonnes, respectively, in 2021. The authorities aim to boost crop self-sufficiency from 50% in 2020 to 65% by 2025 by increasing planted area to 3.7m feddans (15.4 ha), and raise average yield per feddan from 2.7 tonnes to 3 tonnes.

In May 2021 Egypt implemented a new water resource and irrigation law aimed at restricting the cultivation of rice, a water-intensive crop. The legislation outlined fines of between LE3000 ($191) and LE10,000 ($635), and prison sentences of up to six months for farmers found to plant rice outside areas permitted by the government to deter irresponsible water use. The illegal growing of rice is commonplace in Egypt, with farmers cultivating between 200,000 and 300,000 ha illegally each year.

Costs rose in 2021 as winter cereal seed prices increased. For example, the price of a bag of wheat seeds rose from LE215 ($13.66) to LE260 ($16.52), and the cost of barley increased from LE185 ($11.75) to LE250 ($15.89). Farmers were also affected by a 50% increase in subsidised fertiliser costs implemented in November 2021. Before the move, farmers of old land were able to procure fertiliser for LE3000 ($191) per tonne. Under the new plan, MALR can charge farmers up to LE4500 ($286) per tonne.

Wheat

As the world’s largest importer of wheat, in 2021 Egypt’s private sector imported 6.9m tonnes of the product – an 11% increase from the previous year – while the General Authority for Supply Commodities imported 4.7m tonnes, down nearly onethird from the previous year. The government had worked to stock its reserves during the pandemic, but reduced public imports after prices increased in early 2022 on the back of export restrictions from Russia. The invasion of Ukraine by Russia pushed prices up further, with local wheat importers seeing record high prices, payment complications due to sanctions against Russia and disruptions in the Black Sea starting in late February of that year.

In an effort to address this, in March 2022 the government implemented incentives for local growers to supply more wheat, including higher prices, as well as quotas and penalties for those who do not comply. This builds on earlier measures aimed at bolstering domestic production, such as incentives for growers to sell to the government instead of the private sector, and a requirement for wheat producers to sell a specified amount to government-approved customers. The government aims to buy some 6m tonnes of wheat from local farmers in 2022; together with the 4m tonnes available in warehouses as of late February that year, this was expected to cover subsidy requirements.

Moreover, by mid-2022 Egypt had diversified its sources of imported wheat to fortify supply. It signed an agreement with India in early May for the purchase of 61,500 tonnes, and received a shipment of 63,000 tonnes from France in June.

Livestock & Aquaculture

Livestock accounts for around 37.5% of agricultural production by value, while fisheries contribute around 11%, according to a 2020 report from the FAO. The organisation found that the country had 5.4m sheep, 5.1m cattle and buffalo, and 4m goat, as well as a number of camels, donkeys and horses. The cattle and buffalo population generates approximately 6m tonnes of milk and 500,000 tonnes of meat each year, with revenue of $8bn from the industry. Egypt remains a net importer of both beef and dairy. It produces some 13bn eggs a year, valued at $1.3bn, as well as 1.4bn tonnes of poultry meat, totalling $3.5bn.

Roughly 800,000 people are dependent on fishing and aquaculture for their livelihoods, with 150,000 employed in aquaculture and 650,000 in capture fisheries. The country’s fishers have access to 130,000 ha of aquaculture ponds, and utilise 26,000 non-motorised and 5000 motorised fishing vessels for their operations. Fish production stands at around 1.8m tonnes a year, though Egypt continues to be a net importer of fish products.

Meat, poultry and fish are a vital part of the Egyptian diet, providing much of the population’s protein and nutrients: fish, for example, provides around 25% of the protein intake in the Egyptian diet. As the population grows, Egypt will require greater animal production to meet dietary requirements. The FAO estimates that to meet rising needs, between 2020 and 2050 the production of beef, poultry and fish will need to rise 109%; milk by 290%; and eggs by 162%. The government aims to facilitate this rise in productivity through the use of automation technologies and big data (see analysis).

Exports

Egypt exports around 350 different agricultural products, such as citrus fruits, potatoes, onions, strawberries, pomegranates, beans, beets, guavas, peppers, mangoes, garlic, grapes and watermelons. From 1990 to 2020 the annual production of fruits, vegetables, and roots and tubers for export rose by 3.5%, 2.1% and 4.3%, respectively.

After a decrease in agricultural exports during the first year of the pandemic, Egypt reported a 14% increase in the value of exports in the first nine months of 2021. In 2020 food exports amounted to 14% of the total value of exports, placing it third within non-petroleum exports at $1.8bn. In 2021 more than 5.6m tonnes of agricultural products were exported, up from 5.1m tonnes in 2020. The principle exports were citrus fruits (1.8m tonnes), fodder beets (650,000 tonnes), potatoes (614,000 tonnes) and onions (276,000 tonnes).

The Agricultural Export Council (AEC) is working to increase the volume of the sector’s exports by 10% in 2022. In the medium term, crop cultivation for export is expected to improve after MALR finalises the processes of a new system to register all farms and their locations to create a digital map of export farms. According to the AEC, this will be a key determinant of growth, as it will create a traceability system and facilitate quality control.

The long-term outlook suggests, however, that fruit and vegetable exports are likely to decline by 4.6m tonnes by 2050 as domestic needs increase. In addition, per capita consumption of food crops could fall by 2.1% over the same period as higher food prices and the impact of climate change negatively affect the sector and the wider economy.

Water & Irrigation

Because of its arid climate, Egypt relies on irrigation for much of its agricultural activity. It has the largest area of irrigation among Nile Basin countries, most of which is from surface water. In reclaimed areas, however, surface irrigation is banned and farmers have to use drip irrigation. The sector consumes nearly 90% of water resources, underscoring the need to adopt more efficient methods of use, especially as climate change further exacerbates water scarcity. The country’s per capita share of water from the Nile River was 560 cu metres per person, nearly half the 1000-cu-metre threshold for water scarcity.

The government is investing in desalination plants, groundwater-extraction facilities, wastewater treatment plants and technologies for the reuse of treated water. Nearly 60 desalination plants are in operation, processing 440,000 sq metres of water per day, and as of mid-2021 the country aimed to open an additional 39 plants. It is also working to modernise irrigation systems.

Egypt is home to the world’s largest wastewater treatment plant, Bahr El Baqar, which was inaugurated in September 2021. The site can process 5.6m cu metres of wastewater per day, enough to cultivate nearly 140,000 ha of land. Much of the water from the facility will be used for irrigation and fishing, and officials hope the plant will further land reclamation and cultivation initiatives east of the Suez Canal. Even before the opening of the facility, these efforts had begun to bear fruit, with the percentage of treated to total wastewater rising from 50% in 2015 to 68.7% in 2019.

The El Hammam agricultural wastewater plant in Marsa Matrouh, set to come on-line by the second quarter of 2023, will have a capacity of 6m cu metres of wastewater a day, more than Bahr El Baqar, facilitating the irrigation of 500,000 feddans (208,000 ha) of land. Construction began in February 2021, and as of March 2022 the plant was nearly a quarter complete. The project is a joint venture between Dubai-based water management firm Metito and local construction firms Hassan Allam, the Arab Contractors and Orascom Construction.

Agro-Industry

Despite being one of the world’s top exporters of fresh fruit and vegetables and the largest exporter of fresh citrus, Egypt exports a much smaller volume of processed foods. The country processes less than 10% of its fresh crops, below the global average of 25-35%, and exports less than 1% of these processed goods. The pandemic amplified challenges facing the segment. A shortage of qualified workers and a lack of adequate vocational training became clear as agro-industry struggled to find qualified managers, supervisors and other trained workers during a time that health, safety and quality assurance were key.

Outlook

Agriculture is a key contributor to GDP, supported by government efforts to foster growth, an extensive irrigation network, water recycling programmes and land reclamation. It also employs a large share of the population – many of whom live in rural areas – making it a key vehicle for inclusive economic diversification. Reforms have been introduced to improve irrigation techniques and cultivation efficiency to reduce water and food insecurity. Moreover, private investment, mechanisation and digitalisation can modernise methods and inputs.