Agri sector in Egypt

Added on 28 April 2020

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The agricultural sector is one of the main pillars and a fundamental component of the Egyptian economy. According to the Central Bank of Egypt, the agricultural sector had a 13% share in Egypt's GDP and represented 25.8% of the national labor force, which reveals that more than eight million people work in the agricultural sector directly. As stated by the Ministry of Agriculture, Egyptian agricultural land occupies an area of nine million feddans and the cropped area is determined to be 15 million feddans (6.25 million hectares).

The Egyptian Government has paid special attention to the agricultural sector, which can be seen through its adoption of two mega projects. The first one is reclaiming and cultivating 1.5 million feddans (0.5 million hectares), whereas the second project focuses on establishing 100 thousand greenhouses to produce vegetables. Accordingly, the Egyptian agricultural market has recently been gaining attention from multinational corporations that produce farming inputs, such as crop protection, crop nutrition, seeds and more.

Agricultural market segmentation

The agricultural market can be categorized into two major segments: one is old land that denotes more than 70% of agricultural regions and is mostly fragmented. This area comprises less than five feddans (two hectares) and is owned by small farm holders. Old land is concentrated along the Nile River, as well as the Nile Delta that almost entirely has clay soil, depending on the surface irrigation. Small farm holders usually cultivate traditional crops with low profitability margins. Therefore, the farm holders are very sensitive to price and do not have the financial capability to massively invest in farming inputs since the increase in the prices of traditional crops is not proportionate to the accelerating prices of farming inputs.

The main crop cultivated on the old land is wheat and reflects some 33% of the total cultivated area and 50% of the total cultivated old land (i.e. exceeding three million acres). Since wheat is subsidized by the Egyptian government and its price is fixed, with an annual increase, a majority of the growers in the old land do not invest in wheat. It has been proven that most of the old land farmers depend on retailers to acquire their farming inputs and proper technical information.

Crop protection multinational companies, distributors and wholesalers have restricted sales and cash collection policies. In addition to this, they do not have the capability to cover all the fragmented areas in the old land, which leads to them relying on the retail network for distribution.

Crop	Old Land (K Feddan)	Old Land (K Hectare)
Wheat	3,120.00	1,300.00
Potatoes	156.00	65.00
Citrus	388.80	162.00
Grapes	69.60	29.00
Peanuts	48.00	20.00
Tomatoes	240.00	100.00
Sugar Beets	360.00	150.00
Bananas	37.92	15.80

The second segment is new land, which occupies approximately 2.88 million feddans (1.2 million hectares) and represents some 30% of the total cultivated area. New lands can be identified as lands that have been reclaimed in the late 80s and early 90s of the last century and are characterized by sandy soil with spraying and dripping irrigation. These lands are owned by well-organized agriculture companies, investors and exporters.

The farms in the new land are managed by educated agronomists and follow a high-quality operational level by pursuing the latest technologies in farming operations in order to increase their yield and quality to meet both the exporting crop standards, as well as the high standards of the local niche market. New land farmers purchase their farming inputs directly from MNC distributors without any interference from retailers.

Crop	New land (Feddan)	New land (hectare)
Wheat	600.00	250.00
Potato	120.00	50.00
Citrus	146.40	61.00
Grapes	100.80	42.00
Peanuts	110.40	46.00
Tomato	264.00	110.00
Sugar Beet	96.00	40.00
Banana	24.72	10.30

Crop protection market in Egypt

Crop protection products represent 6% of the farming inputs in Egypt. In 2018, Egypt consumed approximately 10,000 metric tons (MT) of crop protection products, making it topmost among most countries consuming crop protection products in North Africa. The average consumption of crop protection products is 73.5 grams, which is less than five times the international average consumption of 385 grams. The total registered crop protection products are around 1,600, derived from 280 active ingredients. Egypt imported over 70% of the crop protection products from 27 countries, first of which is China with 2000 MT, followed by India with 1700 MT, and Germany with 1200 MT. The top players in the importation market are Syngenta, which is the market leader, followed by BASF in second place, and then, Corteva. Since 2016, the market landscape witnessed a tremendous change in distribution approaches and the structure and selection of channels. Some leading companies adopted a completely new approach to the industry; for example, BASF replaced distributors with direct-selling organizations, trying to apply the FMCG industry approach in the industry. The crop protection industry experts in Egypt suggested five main factors that may have influenced the decision of MNCs over the channel selection and design:

?	Product complexity: Technical complexity offers a competitive edge, especially when growers understand how to use products inappropriately. Therefore, technical assistance is something that should be offered at the time the products are delivered to the retailers through distributors and retailer.
?	Profitability: The closer the company is to the end user, the more profitable is the business, and the company's margins also increase.
?	Economical & regulatory situation: After the devaluation of the Egyptian pound in 2016 and the increase in the registration fees of crop protection products, besides the new regulations by the Agriculture Pesticides Committee to register or distribute products across the country, leading companies faced a challenge in maintaining their market share and complying with market needs.
?	Market competition: In a price-sensitive market, it is difficult to find a way to differentiate and to keep up with the competition, which is why it might be market competition playing a vital role in the transformation of distribution channels.
?	Bargaining power: Losing market access, market needs and insights and relying on wholesalers and distributors, meant their bargaining power increased over that of the manufacturing and leading companies, which forced leading companies to act over their distribution strategy.

Fertilizer market in Egypt

Egypt consumes around 5.5M MT annually. Nitrogen-based fertilizers come in first place at around 3.7M MT in various forms of Ammonium nitrate, Ammonium sulphate and urea. More than 70% of nitrogen-based fertilizers are locally produced. Phosphate-based fertilizers come second with 1.25M MT, SOP market in third place with 162k MT, followed by 140k MT of bulk blending and water soluble NPK compound fertilizers. Egypt imports around 10 thousand MT of foliar fertilizers and bio-stimulates. The most popular and demanding trace elements are represented in EDTA- and EDDHA-chelated products, while the most popular foliar biostimulators formulation are amino acids and seaweed products. Humic acid products are the market leaders in the bio-stimulant importation market, as they have a 5000 MT market size, with 88% dominated by Chinese products.