Egypt Beef Industry Outlook: Industry Faces Uncertain Future Amidst Rising

Costs and Supply Chain Disruptions

By Paul Ongeto

Egypt's beef industry stands at a critical juncture, facing a confluence of challenges that threaten its growth trajectory and ability to meet the nation's demand for this highly valued protein source. The industry's reliance on imported feed, coupled with rising production costs and a volatile global market, has placed immense pressure on Egyptian livestock producers and consumers alike.

This article provides a thorough analysis of Egypt's beef industry, scrutinizing the underlying production and consumption patterns while shedding light on the obstacles hampering its growth trajectory.

High Production Costs Squeezing Producers

Egypt's livestock industry is heavily reliant on imported feed, with approximately 65% of its domestic feed requirements sourced from abroad. This dependence on imported feed renders Egyptian livestock producers highly susceptible to international price fluctuations, as evidenced by the current market situation. The economic fallout from Russia's invasion of Ukraine, coupled with broader global economic challenges, has triggered a surge in international feed prices, including for essential feed grains like corn.

USDA data reveals that over the past year, the price of corn has skyrocketed from 8,000 Egyptian Pounds (EGP)/ MT (US$259) to a staggering 19,000 EGP/MT (US$615). The situation has been further exacerbated by a lack of foreign currency, leading to unanticipated demurrage expenses and storage complications.

In the face of these challenges, only integrated livestock operations, encompassing grain production to finished products, have been able to withstand the feed shortages and high prices. Many smaller and medium-sized operations have been forced to reduce their herd sizes, resulting in record-high slaughter rates. Consequently, the USDA forecasts a 4% decline in Egypt's marketing year ending herd stock, reaching 7.8 million head.

CURRENCY CRUNCH, SUPPLY CHAIN DISRUPTIONS HAMPER IMPORTS

Egypt's domestic beef production is estimated to rise to 440,000MT in 2024 due to record high slaughter rates. This, however, falls short of meeting the country's demand, necessitating imports to bridge the gap. Sudan and Brazil were Egypt's primary foreign suppliers until the Sudanese conflict disrupted trade. In Sudan's absence, India has emerged as a key source of beef, particularly water buffalo meat.

However, Brazil's supply has been dwindling since 2020. Brazil exported 63,500 head of cattle in 2020 compared to 94,602 head the previous year. In the first half of 2023, Brazil shipped a mere 18,000 head. This decline stems from China's growing appetite for frozen Brazilian beef and value-added meat cuts.

With traditional import markets drying up, the Egyptian government is seeking alternative sources of live cattle in Europe (Spain, Germany, Hungary) and Latin America (Colombia, Uruguay). Additionally, Egypt is reportedly exploring beef procurement from Djibouti, Somalia, and Chad. However, no successful purchases from these countries have been announced.

Despite population growth and an influx of refugees, Egyptian beef consumption is projected to decline in 2024 due to reduced purchasing power and high inflation. This is stifling growth and limiting imports. The USDA forecasts Egypt's total beef imports in 2024 to reach 160,000 metric tons (MT), a 35% decrease from 2023's 245,000 MT.

Economic constraints have also taken a toll on businesses, with several private sector importers exiting the market, as reported by the USDA. Government ministries, including the Ministry of Supply and Internal Trade, the Ministry of Agriculture and Land Reclamation, and the Ministry of Defense, remain Egypt's largest importers of live cattle and frozen beef and varietal meats. While these ministries strive to control prices and lower import costs, their efforts have not yielded complete success.

Consumers Bear The Brunt Of Rising Costs

In Egypt, beef consumption is shaped by cultural preferences and economic realities. Freshly slaughtered beef holds a strong preference over frozen beef, driven by cultural norms and perceived quality. Consumers source their beef from a variety of channels, including locally produced fresh beef, imported feeder cattle, imported cattle for immediate slaughter, frozen water buffalo meat from India, and frozen beef. For budget-conscious households, beef liver offers a palatable and affordable alternative to more expensive cuts of beef.

The rising production costs and currency-related challenges have inevitably trickled down to consumers, leading to a significant increase in beef prices across the country. The average retail price for beef in Egypt has more than doubled in the past year, placing a strain on household budgets and impacting consumer purchasing decisions.

According to the USDA, subsidized meat prices reached EGP 260/kilogram (US$8) in 2023, compared to EGP 85.00/kilogram ($3) in 2022. Beef liver prices have also witnessed substantial increases, with the average domestic retail price reaching EGP 400/kilogram ($13) this year, compared to EGP 160/kilogram ($5) in 2022. Sales by the Holding Company for Food Industries (HCFI), a subsidiary of the Ministry of Supply and Internal Trade (MOSIT), are averaging EGP 300/kilogram ($10).

As a result of these challenges, Egyptian beef consumption is projected to decline by 6 percent in 2024 compared to 2023 estimates. This contraction in demand reflects the reduced purchasing power of consumers and the heightened cost of beef, forcing many to seek alternative protein sources or reduce their overall meat consumption.

Halal Certification Updates And Impact On Beef Trade

In the predominantly Muslim country of Egypt, halal certifications play a crucial role in animal protein trade. A significant development in this regard occurred on January

5, 2020, when the Egyptian government issued Prime Ministerial Decree No. 35/2020. This decree established a new state entity, a joint-stock company, formed by the Ministries of Islamic Affairs, Agriculture and Land Reclamation, and the General Organization for Export and Import Control (an agency of the Ministry of Trade and Industry). Under this new arrangement, the joint-stock company ISEGHALAL has become the official Egyptian authority responsible for granting halal label certification for foreign products destined for the Arab Republic of Egypt.

For U.S. meat producers, the successful completion of food safety and halal audits by officials from the General Organization of Veterinary Service (GOVS) - Ministry of Agriculture and Land Reclamation signifies that all U.S. beef establishments under USDA Food Safety Inspection Service supervision are now eligible to export to Egypt, provided they adhere to halal guidelines. However, it is important to note that halal certification fees have increased substantially under the new system. Previously, halal certifiers charged between U$10.00 and U$20.00 per metric ton for certification. This fee has now jumped to US$0.10 per pound, equivalent to U$220.00/MT (EGP 3,516.00/MT). These higher halal certification fees have, in turn, led to an increase in beef prices for Egyptian consumers.

THE ROAD AHEAD: A CALL FOR RESILIENCE AND INNOVATION

The future of Egypt's beef industry hinges on its ability to adapt to the changing landscape and overcome the challenges that lie ahead. By addressing the industry's current challenges and embracing innovative solutions, Egypt can safeguard its beef production capabilities, ensure a stable supply of this essential protein source, and support the livelihoods of those involved in the sector.