Cracks of agricultural liberalization .. Will the policy of expanding contractual crops succeed? — Egypt 360

The repercussions of the crisis of the Russo-Ukrainian war led to a reconsideration of agricultural policy. To achieve self-sufficiency in strategic crops, pay attention to agriculture and take seemingly serious steps towards developing it.

Contract farming is one of the most important mechanisms taken by the state to develop and develop agriculture and enhance its capabilities. As it guarantees the farmer a guaranteed marketing process for his products and a consensual price before the planting process. It also guarantees him some privileges during the transplant process, such as providing some financial assistance, such as obtaining loans from contracting parties. And ensuring transportation and extension for agriculturalists.

Agricultural contracts are based on a contract between the producer and the buyer under which the producer is obligated to supply. According to the quantities, items, quality, price and other conditions included in the contract.

What does agricultural liberalization mean?

The policy of agricultural liberalization began during the rule of President Hosni Mubarak, in the early eighties, when economic liberalization policies escalated. Agricultural conditions in Egypt deteriorated increasingly with Egypt’s accession to the International Trade Agreement.

Liberalizing agriculture means for the state to remove its hand from agricultural activities, stop defining the target types of agriculture, stop financing its requirements and leave it to free market mechanisms.

The United States had provided agricultural aid to Egypt, totaling, during the period (1975-2000), three billion dollars. But it was conditioned by conditions and dictates; Such as Egypt importing agricultural machinery and commodities from the United States, no matter how much more expensive they are than their alternatives. This aid also prevented the cultivation of strategic crops, such as wheat, in exchange for obtaining them as aid, according to the Jordanian writer Khaled Bashir.

In 1974, Resolution No. (69) of 1974 was issued, according to which the state’s guardianship of unowned agricultural lands was abolished. This resulted in handing them over to the owners and gradually evacuating the lands from the farmers who were holding them on lease from the state. The process of eviction of tenants accelerated with the approval of the Egyptian Parliament, in 1975. A law stipulated the possibility of evicting the tenant from the land if he was two months late in paying the rent.

With the end of Sadat’s rule, in 1981, a law was passed raising the maximum limit for individual ownership to two thousand acres, and for the family to three thousand acres. And companies to ten thousand acres, and this decision came in response to the interests of private sector companies with growing influence during the seventies. Thus, a new era of land concentration in the hands of a few entrepreneurs and emerging companies began during the open era. The pace of editing was accelerated.

Solving Cooperatives

Before that, in 1976, a decision was issued to dissolve the Central Cooperative Union, as a prelude to liquidating the agricultural cooperative movement. Based on the report of the American mission to Egypt, under the supervision and funding of the American Development Organization. Which presented a report in which it confirmed that the agricultural cooperative system in Egypt suffers from a defect, and based on this recommendation, the cooperative union was dissolved.

At the time, the cooperative union included about five thousand societies spread across the country, and 3 million subscribers, and its hierarchical structure ends with the central cooperative union, and it played important roles to support and support the farmer; It provides production requirements (seeds, fertilizers and pesticides) at subsidized prices, and undertakes the task of marketing agricultural crops to protect farmers from exploitation by traders and brokers.

In 1992, a law was issued to “reform the rental relationship between the owner and the tenant” to eliminate the remaining gains from Egyptian agriculture. The law allowed for the liberalization of agricultural land rental prices, and the possibility of owners recovering the leased land in the event of farmers’ failure to pay.

And with Egypt’s accession to the International Trade Agreement (GATT), in 1995, which obliges the signatory countries to raise and remove customs barriers on imported goods and products, including agricultural ones. This quickly led to the deterioration of local agricultural production and related industries.

late procedures

The question here is: will the state’s late measures succeed in restoring the cracks in Egyptian agriculture that have accumulated for 40 years?

Despite the issuance of the Contractual Cultivation Law No. 14 of 2015. Which provided for the establishment of a center called the Contractual Cultivation Center, to be established at the Ministry of Agriculture and Land Reclamation. According to Article 2 of this law, the center is responsible for registering contract farming contracts whenever either party requests it. Awareness, guidance and promotion of contract farming, these texts despite their validity. However, it does not apply in practice, as there is no guarantor that obliges one of the parties to implement in the event of non-compliance with the contract. Where the size of the contractual cultivation areas in Egypt does not exceed (1.2 to 1.3 million feddans), representing approximately 5% to 6% of the total cropped areas. According to Dr. Mohamed Youssef, Professor of Agriculture and Biocontrol, Faculty of Agriculture, Zagazig University.

Youssef added that contract farming contributes to securing and protecting farmers from the risks of price fluctuations. Because it is the cornerstone to ensure the continuity of agricultural production and to ensure that the crop is marketed to farmers at the highest profit margin. He emphasized that the marketing crisis of agricultural crops is still one of the main obstacles threatening agriculture. This led to the farmers’ reluctance to grow strategic crops that represent food security, such as wheat, rice and corn of all kinds. And the crops that distinguish Egypt from abroad, such as cotton.

Specialties

The center aims to increase farmers’ income levels, increase the efficiency of investing the available agricultural resources and increase export rates. Enhancing the competitiveness of agricultural products in the local and international markets and speeding up the resolution of disputes arising from or due to contract farming contracts. Through the Center’s Arbitration Office, taking into account the provisions of the Egyptian laws regulating arbitration and dispute settlement.

Dr. Saad Nassar, Advisor to the Minister of Agriculture and Land Reclamation. He told 360 that the state is now starting to add some strategic crops to contract crops, such as cotton. Soybeans, sunflowers, and oil crops and their expansion in cooperation between the Ministry of Agriculture and Supply and yellow corn because of their importance in the feed and oil industry, and the addition of wheat to it is being discussed.

He stated that it can be expanded if the Ministry of Supply contracts the Holding Company for Food Industries and Internal Trade. To contract with farmers to motivate them, especially when we have a shortfall in these crops. It does not cover 15% of our consumption needs, especially legumes, beans and lentils.

In addition to the old contract crops such as cane, sugar beet and fragrant cotton with the Ministry of Agriculture, from which he takes seeds for the next year. He pointed out the importance of coordination between companies and farmers to purchase strategic crops to ensure their continuity, such as the commercial cotton crop. Who faces many problems in the marketing currency with the Holding Company for Spinning and Weaving. Sugar companies also contract with beet and cane growers.

It also called on the Ministry of Supply and the General Authority for Supply Commodities to contract with farmers to buy wheat. It is a vital winter crop with fava beans through the General Authority for Supply Commodities. And yellow corn can be contracted with the General Federation of Poultry Producers.

motivational policies

Regarding the advantages of contract farming, Nassar said that contracting with the farmer on the price and the area before the cultivation process is a kind of incentive. Because the farmer is the guarantor of the price before planting, and some types of support from the contracting authorities for the farmer. Such as providing guidance and seeds as the sugar companies do.

Marketing Crisis

According to Dr. Sherif Fayyad, Professor of Agricultural Economics at Cairo University. Egyptian agriculture is facing a crisis in the process of marketing agricultural products that are not directly consumed by the citizen. Such as cotton, wheat, soybeans, etc., especially the smallholders cannot find a negotiating body on their behalf.

He pointed out that the crop that is most exposed to these problems is the cotton crop, which has been repeated during the past 5 years. As a result, the area decreased from 380,000 acres to nearly 100,000 acres.

He stressed that the process of linking farms and factories is necessary for both parties, the farmer and the factory. It provides and guarantees raw materials for factories, and the farmer benefits from marketing and some types of support.

agricultural clusters

Fayyad told Egypt 360 that setting a fair price policy for crops must create agricultural clusters. What requires an active and active role for the union of producers of these crops or activating the role of cooperative societies. To be effective in formulating the price policy for crops according to the agricultural inputs and the cost of production.

Fayyad stressed the need to restructure cooperatives to become a link between the farms and the factory. Starting from setting a remunerative price for the farmer when contracting the crop and providing raw materials to the farmers. Pointing out that the factory also benefits from the contractual system in obtaining its materials from the farms directly without an intermediary. He gets it at a lower price and ensures the stability of the amount he needs annually.

Crop Diversity

Major General Mokhtar Fakkar, head of the Qena Sugar Cane Growers Association, believes that the contracts guarantee the stability of crop areas. According to the needs of the local market at least, but the price must be feasible for the farmer to determine a good profit margin. Especially in light of the high prices of agricultural production requirements of fertilizers, especially in the wheat and reed crops. He pointed out that an acre of sugar cane needs 7 to 10 bags of fertilizer, and farmers have not received their quotas from agricultural associations so far.

He added that the burdens of transporting the cane crop are expensive for the farmer to bear at his expense, even though the supply contracts obligate the company to provide means at its expense. Referring to the suspension of transmission lines in the center of Abu Chat and the oases, which incurs transportation expenses that increase the cost of production.

agricultural cycle

Fakkar called on the Ministry of Agriculture to join hands with agricultural research centers to activate the role of contract farming for these two crops. This is due to their relative importance by changing the strain of the currently cultivated cane (S9), which has been relied upon for 60 years, according to him. This led to poor productivity, explaining: “90% of the crop is exposed to decay because of its old age. Treatment with pesticides does not work, and he demanded the creation of a new breed to ensure the production and continuity of sugar cane cultivation. Maintaining the crop area needed for the sugar industry and 11 other related industries.

farmer insurance policy

As for Muhammad Barbash, the Eloquent Farmer, he pointed out that the Contractual Cultivation Center, since its establishment, has not fulfilled its duties so far in protecting farmers. He pointed out that the farmers planted corn under a promise from the former Minister of Agriculture, Ezz El-Din Abu Steit. that the Poultry Producers Association will buy the crop. This did not happen until the price of the ardeb reached 140 pounds after they refused to implement the protocol.

Barbash suggested some mechanisms to protect agricultural crops and insure the farmer, including launching the “insurance policy” against the risks of agriculture. Like the climatic fluctuations that are occurring now and the decline in the prices of crops, livestock and poultry. To be financed by 25% of the farmer, 50% of the state, and the last quarter by the Ministry of Agriculture, to provide protection for agriculture.

Barbash also suggested the tripartite contract guaranteed by the state between the farmer and the contractor because the farmer produces under the conditions of the best specifications and is linked to a price. Nevertheless, upon receipt, the prices are changed in a clear extortion process.

In order to reduce the extortion process, Barbash demanded the creation of a special department for contract farming affiliated to the Ministry of Agriculture in each district. The contract also includes the Chamber of Commerce and Industry affiliated with it, a guarantee of receiving the agreed amount.

Barbash criticized the role of the cooperative union, saying that it does not protect farmers and is satisfied with distributing rewards to members.

For his part, said Dr. Muhammad Al-Qursh, Assistant Minister of Agriculture and spokesman for the ministry. The ministry has a coordinating role between producers and farmers, such as linking beet and cane growers. It is currently expanding in this area, especially after the issuance of the contractual agriculture law. And introduced new types for expansion, such as the flower of slaves and soybean.

He pointed out that the ministry contracts on its own for broken cotton with the Association of Cotton Producers and Farmers. He said, “There is a group of crops that we do contract cultivation, and the wheat crop depends on this matter.”

In his statement to Egypt 360, he affirmed that there is a political directive to establish additional incentives and to provide collection points. Measures were taken aiming at increasing the productivity of the feddan and developing the productivity of wheat. So that a contract is made between the producer and the factory so that there is an integrated cooperation.

Al-Qarsh said that the incentive package includes setting practical steps to bridge the productivity gap of oil crops. Raising the self-sufficiency rate from 2 to 10% at least, and this requires that there be a contract between the producer, the manufacturer and the consumer. So that the contract is tripartite between the farmer, the factory and the Ministry of Supply, because the Ministry of Supply is working to solve the problem of oils in Egypt.