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USDA GAIN: Livestock and Products


26 September 2013

USDA GAIN: Egypt Livestock and Products Annual 2013USDA GAIN: Egypt Livestock and Products Annual 2013

FAS Cairo forecasts that in 2014 Egypt’s total beef production, imports and domestic consumption will slightly increase. Total beef production is anticipated to reach 290 thousand metric tons (TMT), up by about 5 TMT or 1.7 percent from the 2013 level. In 2014 an additional 15,000 head of cattle will be slaughtered, and we project that calf production will commence to recover. We see calf production reaching 1.7 million head, up some 80,000 head or about 5 percent from the 2013 level. FAS Cairo similarly forecasts beef imports to reach 230 TMT, up 15 TMT or about 7 percent from the 2013 level. Imports of live cattle in 2014 will likely reach 105,000 head, up 5,000 head from 2013’s numbers. We assume that beef consumption will surpass 520 TMT, up 20 TMT from the 2013 level as Egypt’s political and economic situation gradually stabilizes.

USDA GAIN: Livestock and Products

Commodities:

Animal Numbers, Cattle. Meat, beef and veal

Production:

FAS Cairo forecasts Egypt’s calf production growing to 1.7 million head in 2014, up some 80,000 head or about 5 percent compared to the 2013 level. We attribute the increase to more effective vaccination of Egypt’s cattle and buffalo herds against foot-and-mouth disease (FMD-SAT2).

In May 2013, Egypt amended Agricultural Law 53 (1966) making livestock immunization and insurance mandatory. To control the spread of FMD-SAT2 and other livestock diseases, farmers and livestock breeders are obligated to vaccinate their livestock, as well as purchase insurance against disease-induced animal losses. The mandatory fee for this service is Egyptian Pounds (LE) 70/year (~$10/year)/animal. Reports indicate that 40 percent of Egypt’s herd is currently vaccinated against the FMD virus. This has lowered to 40 the reported number of positive FMD cases in 2013.

Virtually the entire Egyptian livestock herd (both cattle and buffaloes) are maintained for dairy production. Egypt does not maintain a domestic beef herd. Animals consist of imported dairy cows and mixed breeds. FAS Cairo’s herd data in its production, supply and demand (PS&D) table assumes a roughly even split between cattle (dairy cows) and buffaloes.

FAS Cairo forecasts total beef production in 2014 to reach 290 thousand metric tons (TMT), up by about 5 TMT or 1.7 percent from the 2013 level. In 2014 we foresee an additional 15,000 head of cattle being slaughtered, as well as calf production recovering. Beef production is still however down from the 2011 high of 312 TMT due to the lingering effects of the 2012 FMD-SAT2 outbreak notwithstanding improved vaccination levels.

Egypt continues to promote its twenty year old “veal project” with the hope of achieving self-sufficiency in meat production. The government’s underperforming program aims to entice small livestock breeders with low interest micro-credit loans. However, the credit facilities are often insufficient to cover high breeding and feed costs.

Consumption:

FAS Cairo forecasts that local beef consumption will surpass 520 TMT, up about 4 percent from the 2013 level as Egypt’s political and economic situation gradually stabilizes. This increase is largely dependent on physical security improving sufficiently enough to woo tourists to return to Egypt. Otherwise we would see demand stagnating, remaining at close to 2013 levels of 500 TMT.

Hotel occupancy rates in Cairo, Alexandria, Luxor, and the Red Sea resorts have dropped precipitously since May 2013 to 10 percent of their pre-January 2011 Revolution levels. The July 2013 ouster of Freedom and Justice Party (Muslim Brotherhood) President Mohamed Morsi has seen occupancy rates further dip to 5 percent of their pre-2011 levels. Egypt’s Airport Company (local airport authority) confirms that commercial air traffic to Egypt is now down 50 percent; the Red Sea tourist resort towns of Hurgada and Sharm El-Sheikh have been especially hard hit.

Political and economic turmoil has also adversely impacted non-tourist consumption patterns. The country’s foreign exchange liquidity crisis of 2012-13 has led to the depreciation of the Egyptian Pound, limiting imports of beef and beef products and driving consumer prices upward. Faced with a shortfall in beef and beef products, Egyptians have turned increasingly to more affordable alternative protein sources such as poultry and fish (when available) or cutback outright on consumption.

Egypt normally imports 40 percent of its beef needs to bridge the gap between domestic production and consumption. Egyptian consumers prefer domestic beef over imported beef due to distrust of foreign halal slaughter practices. Until the recent depreciation of the Egyptian Pound, domestic beef prices commanded a price premium over imports; this situation has now been inverted.

Beef and beef product importers have commented to FAS Cairo that their costs in 2013 have increased by 20 percent, with costs being passed onto consumers. Frozen imported beef until July 2013 had been sold at between LE 30 to LE 45/kilogram (kg) or at about $4.29 to $6.43 (~$1 = LE 6.99). This represents a notable increase in Egyptian Pounds compared to the 2012 price of LE 24 to LE 37/kg. Prices have however just dropped to 2012 levels thanks in large measure to the $12 billion infusion of Saudi Arabia and Gulf States funds (direct cash transfers, loans, and fuel).

Egyptians prefer beef to other types of meat including poultry and lamb. Domestic consumers also prefer fresh over frozen beef for cultural reasons. Egypt’s more affluent consumers view frozen imported beef as being an inferior product. Their opinion is premised on the fact that the bulk of frozen imported beef are low-quality cuts sold at government outlets at reduced prices. The exception to this being the very limited, high-quality (more expensive) largely U.S. beef cuts sold in upscale restaurants and hotels.

Trade:

FAS Cairo forecasts live cattle imports in 2014 to reach about 105,000 head, up some 5,000 head from 2013 numbers. Importers comment that they are sourcing increasing numbers of Sudanese and Ethiopian livestock. Live cattle imports are earmarked for immediate slaughter; however, dairy cows are also being imported. Egypt’s main suppliers of live cattle for slaughter include Brazil, Sudan, Ethiopia, Croatia, and Australia.

U.S-origin live cattle enjoy a positive reputation. In the course of 2013, one of Egypt’s largest fresh milk producers has imported 2,400 head of U.S.-origin bred dairy heifers. This producer informs FAS Cairo that he is expanding milk production capacity by 33 percent to 80,000 MT/annum in 2014.

Australian live cattle imports continue to encounter problems since Egypt reopened its market in 2010. Egypt in August 2012 suspended the imports of Australian live cattle following the detection of animal growth promotants (hormones) in two shipments totaling 32,000 head of cattle. Australia suspended exports of live cattle in 2013 due to animal cruelty concerns with Egypt’s slaughter facilities. We anticipate Brazil supplanting Australia in 2014 as Egypt’s largest supplier of live cattle for slaughter.

To ease inter-state tensions among the Nile basin countries disputing Nile River water quotas, Egypt is actively promoting increased cooperation and improved economic/trade ties. In a bid for continued access to upstream water, Egypt is increasingly favoring the import of Sudanese and Ethiopian live cattle and chilled beef from Ethiopia. Egypt is a water scarce country (receiving less than 1,000 cubic meters/capita/annum), which by 2020 will need to identify additional water to meet a 20 percent expansion in demand relative to current supply.

The policy of favoring imports of cattle from Sudan and Ethiopia is not without pitfalls. Besides high transportation costs due to inadequate roadways, a key concern is the potential introduction of animal diseases that can rapidly become epidemics due to Egypt’s poor control and vaccination measures.

The Ministry of Agriculture and Reclamation (MALR) – General Organization for Veterinary Services (GOVS) confirms that Egypt will import 5,500 Ethiopian cattle in September 2013, representing the largest import volume since the resumption of imports in 2010. Previously Ethiopian cattle imports were banned due to the 2007 outbreaks of FMD, lumpy skin disease (LSD), and three-day fever. Egypt’s 2012 FMD-SAT2 outbreak is attributed to Ethiopia-origin infected live cattle shipments and to smuggled animals (including sheep) from Libya.

Egypt and Sudan signed a memorandum of understanding in June 2012 establishing a joint livestock production facility. Sudan has allocated 1,750 feddans (~735 hectares) for this project. This farm will handle 4,000 head of cattle and a similar number of sheep. Egypt’s MALR confirms that it has completed its assessment of the technical requirements for implementing this project.

FAS Cairo forecasts frozen beef imports in 2014 to reach 230 TMT, up 15 TMT compared to the 2013 level. The projected uptick in 2014 is based on the assumption of increased political stability and a lessening of economic uncertainty. If this holds true, consumers will return to previous consumption preferences favoring fresh beef over frozen product. Egypt’s main suppliers of frozen beef through 2014 are Brazil, Argentina, the United States, Australia, Uruguay, and New Zealand. India will remain Egypt’s main supplier of frozen buffalo meat.

Egypt’s foreign exchange liquidity crisis has constrained imports in 2013, forcing importers to rely on the Central Bank of Egypt’s dollar auctions. Reportedly importers continue to struggle to secure sufficient amounts of dollars, especially for larger transactions, to meet their international payment obligations. This situation has led importers to not finalize import purchases, as well as caused foreign (including U.S.) suppliers to either withhold credit and or shorten payment terms.

Egypt does however partially ban the import of beef and beef products from Brazil, namely imports originating in Parana state. Egypt has banned Parana state imports since the December 2012 positive detection of an atypical case of bovine spongiform encephalopathy (BSE). This ban has had a minimal impact on Brazil’s overall exports of frozen beef to Egypt.

September 2013

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