Citrus Annual 2012

An Expert's View about Citrus Fruits in Egypt

Posted on: 28 Dec 2012

Post forecasts Egypt’s MY2012/2013 orange production at roughly 2.5 million metric tons (MMT), up 4.3 percent compared to MY2011/2012.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 12/16/2012 GAIN Report Number: Egypt Citrus Annual Approved By: Jonathan Gressel Prepared By: Mohamed Hamza & Mariano J. Beillard Report Highlights: Post forecasts Egypt’s MY2012/2013 orange production at roughly 2.5 million metric tons (MMT), up 4.3 percent compared to MY2011/2012. Total area harvested at 113,000 hectares (HA) is up 15,304 HA, or nearly 16 percent. We forecast orange exports to reach 1 MMT, up by 10 percent in MY2012/2013. A good harvest this season is permitting Egypt to retain its position as the world’s sixth largest orange producer and second biggest exporter. Executive Summary: Egypt is a leading producer and exporter of oranges. Thanks to a good harvest this season, Egypt will retain its position as the world’s sixth largest orange producer and second biggest exporter in MY2012/2013. Post forecasts total production at 2.5 million metric tons (MMT), up 4.3 percent compared to MY2011/2012. We see total exports reaching 1 MMT, up 10 percent compared to the previous marketing year. The increase in total production is attributable to the upswing in total area harvested; total fruit bearing trees at 8.9 million are up by almost 450 thousand trees compared to the previous season. About 63 percent of the MY2011/2012 total supply of fresh oranges was consumed domestically; roughly 33 percent of the total supply was exported. The processing volume absorbs 3.6 percent, or about 85 thousand metric tons (TMT) of the total supply of fresh oranges. Ukraine, Saudi Arabia, Russia, the United Arab Emirates, Iran, the United Kingdom, and the Netherlands will again import the bulk of Egypt’s orange exports in MY2012/2013. Quarantine issues may impact exports to the Russian market. Commodities: Orange, Fresh Crop Area Orange cultivation accounts for 65 percent of Egypt’s total citrus production. Mandarins and limes are also cultivated. Orange production alone accounts for 30-35 percent of Egypt’s total fruit production. Post forecasts Egypt’s MY2012/2013 total area planted to remain largely unchanged from the previous season at roughly 131,136 hectares (HA). We anticipate however that the area harvested during MY2012/2013 will increase to 113,000 HA, up nearly 16 percent from the previous season’s 97,696 HA. Better growing conditions this season is driving harvest area numbers up. Post is also revising its MY2011/2012 total number of fruit bearing and non-bearing trees. Better growing conditions this season increased the number of fruit bearing trees in production. Tree numbers at 8.9 million are up by about 450 thousand trees, or over 5 percent from the previous season. The previous MY2011/2012 season saw a decline of 11 percent due to a combination of very high summer temperatures combined with high aphid infestation, only to be followed by cooler than normal temperatures and high winds during the winter months. Production Post forecasts orange production at roughly 2.5 MMT, up by 100 TMT or 4.3 percent compared to MY2011/2012. Total area harvested at 113,000 HA is up 15,304 HA, or nearly 16 percent. The increase in total production is attributable to the upswing in total area harvested; total fruit bearing trees at 8.9 million are up by almost 450 thousand trees compared to the previous season thanks to better weather and younger trees starting to bear. Better than anticipated weather conditions during the summer months mitigated pest (e.g., aphids) infestation. A good harvest along with the increase in fruit bearing trees this season will allow Egypt to retain its position as the world’s sixth largest orange producer. Egypt accounts for about 4.5 percent of total global orange production. Source: USDA Egyptian orange production is dependent on irrigation. The Nile River, along with fertile soil conditions and year round sunshine permit high yields and good quality fruit. The economic viability of Egypt’s orange production is facilitated by low labor costs and proximity to major import markets. Although some Egyptian groves maintain orange trees for up to 25 years, trees in this climate are however most productive between years 4 and 15. Oranges are cultivated in almost all of Egypt’s 27 governorates. However, the country’s main production area is concentrated in the Nile Delta governorates of Qalyoubia, Beheira, Sharqiya, Ismailia, and Menufia. Navel oranges are the primary variety grown in Egypt, accounting for 60 percent of total production. Along with navel oranges, the other five main varieties grown in Egypt include Baladi (local), Valencia, blood, Khalily (local), and the Sukkari/ sweet orange (local). Navel and Valencia are the main varieties grown for export. For additional information on varieties grown in Egypt, see GAIN - Egypt Citrus Annual Report 2011. We estimate orange processing volume to remain flat at 85,000 MT, or around 3.6 percent of MY2012/2013’s estimated total production. The Egyptian juice market has previously been targeted by Saudi and Gulf juice processors. More affordable, locally produced Egyptian juice however continues to outperform the relatively higher priced imports. Consumption Post estimates that domestic fresh orange consumption in MY2012/2013 to remain flat. We see consumption largely unchanged from the MY2011/2012 level of approximately 1.4 MMT. Roughly 63 percent of the orange crop is consumed fresh, while 3.6 percent is consumed as juice. We estimate per capita orange consumption at roughly 33 kilograms (kg) per annum. Egyptians tend to favor oranges over other fruits during the winter. Strong consumer demand for oranges during the winter is attributable to their affordable price compared to other winter fruits. Prices are a key determinant of consumption in Egypt. The African Development Bank reports that 40 percent of the Egyptian population lives on less than two dollars per day; while around 21 percent of Egyptians live on less than one dollar a day. Roughly 40 million Egyptians are farmers, many surviving on less than one dollar a day. The Central Intelligence Agency (CIA) estimates Egypt’s population at 83.7 million. Table (1): Local Retail Price for Oranges (Last Week of November 2012) Price in Egyptian Pounds (LE) Equivalent in $US Navel Orange 125-400 EGP. Piaster/kg 21-67 cents/kg Local Orange 100-600 EGP. Piaster/kg 17 cents - 1 dollar/kg Sweet Orange 125-350 EGP. Piaster/kg 21-58 cents/kg Valencia Orange 200-350 EGP. Piaster/kg 33 – 58 cents/kg Wholesale Prices for Oranges (Last Week of November 2012) Price in EGP (LE) Equivalent in USD Navel Orange 85EGP. Piaster/kg 14 cents/kg Local Orange 85 EGP. Piaster/kg – LE 1.40/kg 14 – 24 cents/kg Sweet Orange LE 2/kg 33 cents/kg Valencia Orange LE 2/kg 33 cents/kg Source: Egypt, Ministry of Finance $US 1 = Egyptian Pound (LE) 6.10 Note : 1 Egyptian Pound (LE) = 100 Egyptian Piasters Domestic orange consumption spiked at the beginning of MY2011/2012 when Egypt encountered problems exporting its oranges overseas. Wholesale domestic prices plummeted from 150 Egyptian piasters per kilogram ($0.25) to 50 Egyptian piasters per kilogram ($0.08) on average. Local prices since then have recovered. Trade Egypt ranks as one of the world’s top ten orange producers and exporters. Orange exports run late November through May of the following year. Post estimates exports to surpass 1 MMT in MY2012/2013, up by 100 TMT or 10 percent compared to the previous season. This 10 percent increase in export volumes is attributable to increases in total area harvested and higher production levels, as well as to improved importer confidence in Egyptian exporters honoring their commitments. However, quarantine issues may impact exports to the Russian market. Trade during the previous MY2011/2012 was limited by both a poor harvest and the uncertainty in the aftermath of the 25th of January Revolution. The transfer of power to civilian rule following the country’s presidential elections in May/June 2012 has somewhat stabilized the situation, but confidence is taking time to fully recover. Source: FAS/USDA In MY2011/2012, the Ukraine, Saudi Arabia, Russia, the United Arab of Emirates, Iran, the United Kingdom, and Netherlands were Egypt’s main export destinations. Post foresees no major export destination changes in MY2012/2013. What we are seeing though is an upswing in trade volumes in MY2011/2012 compared to the previous season. Exports to the Ukraine at 277 TMT are up 191 TMT or 222 percent. Exports to the Ukraine normally account for a third of Egypt’s overseas shipments. Similarly exports to the United Arab Emirates at 184 TMT are up 191 TMT or 183 percent. Exports to the United Arab Emirates normally account for about a fifth of Egypt’s orange export volume. Table (2) Egypt’s Main Export Destinations, CY2011/2012, Metric Tons Compe World Ukraine Saudi Russia United Arab Iran United Netherlands titors Arabia of Emirates Kingdom S. Africa 1,040,000 14,697 89,404 122,452 78,634 7,833 66,312 174,544 Egypt 900,000 69,198 159,037 183,104 53,551 81,151 27,963 20,488 U.S.A 710,000 0 1,555 2,057 14,362 0 0 874 Turkey 350,000 35,084 4,902 103,924 293 72,188 263 347 Spain 1,407,605 1,279 4,124 13,339 4,563 19 91,748 140,782 China 125,000 0 227 10,126 2,552 198 0 0 Morocco 120,000 0 319 42 0 0 10 45 Source: Trade Map. Note: Comparable marketing year data for Egypt’s competitors is not available. Iran is an importer of Egyptian oranges. During MY2010/2011, Egypt exported roughly 100 TMT of oranges to Iran, equivalent to 10 percent of that season’s exports. However MY2011/2012 witnessed exports drop by 30 percent to 70 TMT. Sources report that this drop in export volume is attributable to U.S. and European sanctions against Iran; impacting the ability to pay for imports. Iran and its orange importers, after a hiatus of about three months, managed in February 2012 to reopen the orange trade with Egypt. Indications are that commercial volumes are growing. Sources indicate that Egyptian orange exporters are being paid directly in cash. Industry sources claim also that payments are being funneled back to exporters through banks in third countries (i.e., Dubai, India, and Turkey). Table (3): Egypt’s Monthly Exports of Orange, Metric Tons (Last Two Growing Seasons) % 2010/2011 % 2011/2012 October 412 0.05 9,524 1.01 2,50 November 5,364 0.67 17,637 1.8 19,525 December 76,394 9.6 76,208 8.1 127,004 January 146,632 18.5 139,388 14.8 N/A February 164,047 20.7 141,638 15.1 N/A March 200,951 25.4 227,867 24.3 N/A April 135,875 17.1 200,911 21.4 N/A Mai 51,878 6.5 106,205 11.3 N/A June 8,551 1 12,250 1.3 N/A July 700 0.08 3,837 0.41 N/A August 32 0.004 150 0.016 N/A September 6 0.001 25 0.003 N/A Season Total 790,842 935,640 Source: Central Administration for Plant Quarantine (CAPQ). Monthly Percentages Compared to Year’s Total Imports. Marketing: Competitive Environment Egypt’s main competitors include South Africa, Morocco, Spain, Turkey, China, and the United States (see, Table 2). Turkey, Morocco, and South Africa are Egypt’s main competitors in the Russian market. Turkey is also Egypt’s main rival in the Ukrainian market. South Africa, with its countercyclical seasonality is Egypt’s main challenger in Saudi Arabia and in the United Arab of Emirates. Egyptian exporters confirm that tariffs are not the main constraint. Transportation costs, competitors’ proximity to export markets, and seasonality are major determinants. Industry sources indicate that during the previous season, Egyptian orange exporters faced significant competition from Turkey in the Russia, Greece in the European market, and South Africa in the Saudi Arabian market. Turkey’s competitive advantage in the Russian market is its geographic proximity. According to the trade, Turkey can undercut Egyptian export prices on average by $100/ton. Turkey routinely quotes Russian importers prices of $450/ton compared to Egypt’s price of $550/ton. Turkey’s proximity to Russia also eliminates the need for costly refrigerated transport. Similarly Greece’s European Union membership combined with its proximity to major European import markets, allow it to export a relatively high volume of oranges at lower prices than Egypt. Industry sources confirm that South African Valencia oranges benefit from an earlier harvest season (July-September) compared to the Egyptian Valencia oranges harvested in December. The variety’s long shelf life is advantageous for South Africa. It gives South African orange exporters a leg up in setting the market price, as well as the ability to saturate the Arabian Peninsula markets even before Egypt commences its own harvest. Further hindering Egypt’s exports of Valencia oranges was the MY2011/2012 harvest season’s late start. Morocco’s anticipated 27 percent drop in production in MY2012/2013 due to poor weather related growing conditions will assist Egypt’s exports. We see Egypt likely picking up some of Morocco’s export tonnage destined for Saudi Arabia and Russia. Policy: Termination of State Export Subsidies for Oranges The Government of Egypt no longer subsidizes exports of oranges. Exporters however are soliciting that Egypt keep subsidies in place for mandarins, tangerines, lemons, limes, and grapefruit. The Government of Egypt is allocating some LE 300 million ($50 million) to subsidize the export of these other citrus crops. The government has nonetheless ceased underwriting exporters’ transportation costs on the national air carrier, a major subsidy in its own right. Prior to the collapse of the tourism industry in the wake of the January 25 Revolution, the government on average paid $200/ton to export oranges onboard Egypt Air’s international flights. The going cargo rate for non-flag carriers’ was $400/ton. In the post-revolutionary period the decline in tourist numbers has forced airlines servicing the Egypt market, including the Egyptian national carrier to reduce both the number of flights and the size of aircraft. The smaller aircraft servicing today’s market are only capable of transporting 2 tons of cargo versus the 13 tons of cargo that the larger craft can haul. The loss of cargo space is resulting in higher airfreight prices. Sources claim that higher freight airfreight prices have cut about LE 1 billion ($162 million) in export sales of fruits and vegetables in 2012. Industry members are lobbying the government to reinstate the orange transport subsidy. Post sources indicate that approval is highly likely. Drivers and Constraints Despite higher airfreight prices and strong foreign competition, exports remain profitable. Industry sources confirm that on average their return on exports is twice the amount they can hope to obtain from domestic sales. This high return rate drives the export of fresh oranges. The returns on processing oranges for juice are not as significant. A constraint that Egyptian orange producer and exporters are facing is growing import country concerns with the spread of the Mediterranean fruit fly, as well as the peach fruit fly. Most import countries are requiring that Egypt utilize cold treatment to mitigate the spread of fruit flies. Egypt is funding the “Fruit Fly Resistance Project” with the aim of controlling the spread of fruit flies. It is also adopting regulations setting quality control requirements for exported oranges. Table (4): Egypt Export Statistics, Metric Tons Commodity: 0805-10, Oranges, Fresh Year To Date: January - July Partner Country Unit CY2010 CY2011 CY2012 $US Quantity $US Quantity $US Quantity World T 422,290,389 682,748 462,047,346 870,509 391,721,187 1,182,316 Russia T 76,204,102 122,368 104,460,462 187,633 82,058,075 175,596 Saudi Arabia T 85,320,621 139,085 81,826,976 159,136 68,804,529 171,567 Iran T 54,449,430 86,911 54,678,544 98,871 34,724,194 73,375 Ukraine T 39,866,653 63,629 40,132,238 73,399 27,983,482 263,731 United Arab Emirates T 21,597,239 36,029 28,538,397 60,234 24,639,122 168,644 Netherlands T 20,950,331 35,052 11,939,127 23,552 19,419,064 39,957 United Kingdom T 24,777,810 40,222 16,977,836 41,142 16,785,127 43,301 Sudan T 15,466,008 27,855 14,926,023 30,944 12,839,518 30,383 Bangladesh T 5,005,793 7,490 14,413,372 20,626 12,508,454 24,357 India T 833,503 1,256 2,903,587 4,960 8,760,817 16,763 Kuwait T 12,006,378 19,243 10,228,938 21,178 8,345,109 20,772 Iraq T 7,571,009 12,115 13,823,105 28,389 8,144,152 19,965 Lithuania T 5,735,324 8,234 6,337,711 9,395 7,960,900 12,505 Oman T 8,824,591 14,330 8,199,213 17,540 7,144,706 18,101 Malaysia T 3,010,544 5,461 3,254,964 5,587 4,742,381 9,806 Jordan T 3,062,421 4,973 5,320,723 10,553 4,184,980 9,977 Finland T 3,176,081 4,622 4,582,539 7,048 4,080,480 6,338 Qatar T 3,104,425 5,004 3,544,085 7,135 3,608,171 9,102 Source: Global Trade Atlas (GTA). Table (5): Egypt: Production, Supply, and Distribution Data for Orange Oranges, Fresh E 2010/2011 2011/2012 2012/2013 gypt Market Year Begin: Oct 2010 Market Year Begin: Oct 2011 Market Year Begin: Oct 2012 USDA Official New Post USDA Official New Post USDA Official New Post Area Planted 131,121 131,121 131,136 131,136 131,136 (HECTARES) Area Harvested 111,200 111,200 97,696 97,696 113,000 (HECTARES) Bearing Trees 8,896 8,896 7,815 8,450 8,900 (1000 TREES) Non-Bearing Trees 8,340 8,340 7,327 8,260 8,180 (1000 TREES) Total No. Of Trees 17,236 17,236 15,142 16,710 17,080 (1000 TREES) Production 2,430 2,430 2,350 2,350 2,450 (1000 MT) Imports 0 0 0 0 0 (1000 MT) Total Supply 2,430 2,430 2,350 2,350 2,450 (1000 MT) Exports 1,000 1,000 900 900 1,000 (1000 MT) Fresh Dom. Consumption 1,350 1,350 1,365 1,365 1,365 (1000 MT) For Processing 80 80 85 85 85 (1000 MT) Total Distribution 2,430 2,430 2,350 2,350 2,450 (1000 MT)
Posted: 28 December 2012

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