The U.S.-China trade war that forced U.S. exporters to diversify market priorities has played a role in the colossal rise of trade with Egypt, but only on the surface. Many who represent the U.S. soybean sector have been playing the long game with Egypt, helping build demand and processing capabilities, and the results are substantial.
Egyptian importers purchased about $1.3 billion worth of U.S. soybeans in the 2018 calendar year — about the same amount they purchased in the preceding five years, combined — and 2019 is shaping up to be just as lucrative, according to USDA data and recent sales figures. The country was the top destination for U.S. soybean exports (203,200 metric tons) for the week of Oct. 11-17, showing sales are still strong in 2019.
The U.S. Soybean Export Council took a long, hard look at Egypt years ago and pegged it as a country ripe for growth as a foreign market for U.S. soybeans. All the ingredients were there, including strong economic activity, a growing population and a rising demand for protein.
So, USSEC CEO Jim Sutter and his staff began working intensely with crushers, poultry producers and the aquaculture industry in the North African country. They met with chicken and tilapia farmers, held seminars and even brought delegations of the country’s feed consumers back to the U.S.
Jim Sutter, USSEC
“It’s been many years of working in Egypt — with the Egyptian Poultry Association, the aquaculture industry and the crushers, cultivating relationships and helping them to help themselves to grow their industries,” Sutter told Agri-Pulse in an interview. “It’s been fun to watch as we see this growth happening.”
Egyptian consumers wanted more protein, and the local poultry and aquaculture producers wanted to provide it, so USSEC set about trying to make that possible.
“We would put on seminars in terms of how to better produce aquaculture, starting with using the right kind of feeds — increasing the protein content in feeds by putting more soybean meal in the feeds,” Sutter said.
One area of particularly intense focus was Egypt’s growing fish farms. Egypt was producing about 1.5 million tons of fish in 2016, but the country was also importing more than 300,000 tons. By teaching farmers there how to increase efficiency and productivity, USSEC knew it was also creating bigger customers.
The U.S. group, partially funded by USDA’s Market Access Program and Foreign Market Development programs, also sought to introduce technological advances like the In Pond Raceway System (IPRS) that allows farmers to produce more fish without building bigger ponds.
“Egypt is a pretty advanced place,” says Sutter. “They’ve taken this up and they have a large aquaculture industry that is doing well. In the poultry industry, we did the same thing. We would take experts from the U.S. to Egypt and put on conferences to talk with them about how to more effectively feed poultry and how to guard against diseases. And then we would bring the leaders of those industries here to the U.S. to participate in learning opportunities at seminars we put on here in the U.S.”
“Egyptian poultry industry has evolved into a very significant sector of Egyptian agricultural production,” according to a 2017 United Nations Food and Agriculture Organization report that quotes a forecast showing that poultry production is expected to increase by 14% over the next six years.
All of this, together with a major expansion in Egypt’s crushing capacity and meal production, boosted demand for soybean imports.
And the U.S. was in an optimal situation to provide the soybeans for that Egyptian meal. China was only buying a small fraction of the U.S. soybeans it normally purchased while the two countries were locked in an escalating trade war. Brazilian soybeans were becoming very pricey as China used them to replace U.S. imports.
Meanwhile, Egypt’s crushers were expanding meal and oil production, which is expected to continue into next year. USDA’s Foreign Agricultural Service is predicting Egypt will churn out 3 million metric tons of soymeal for the 2019-20 marketing year, an 11% increase from 2018-19.
“We attribute the increase in soybean meal production to expanded local crush capacity, seeking to meet the expanding demand of the local feed industry, as well as that of the refining sector aiming to produce high quality blended oil for human consumption,” FAS analysts said in a recent report.
In that report, FAS notes that new crushing facilities are being brought online and existing operations are expanding. By the end of 2019-20, the country’s crush capacity will reach 11,641 metric tons per day, up from the current 8,484 metric tons. And all of that new capacity is helping drive soybean production, consumption and imports. Egypt is now forecast to consume a record-breaking 3.9 million metric tons of soybeans in 2019-20, more than 14% more than in 2018-19 — which was also a record high.
John Baize, USSEC
Most of those soybeans will be imported and, as it stands now, most will likely come from the U.S. Egypt imported a total of 3.43 million metric tons of soybeans in calendar year 2018 and about 3 million of those tons, or 87%, came from U.S. farms, according to FAS data.
Price and availability have been key, but there’s another factor that’s also helping to boost the popularity of U.S. soybeans in Egypt, says USSEC analyst John Baize — the color.
“There is an aversion to red-colored soymeal in (Egypt),” he explained. “Brazilian soybeans, because of the red dirt they’re grown in, tend to have a darker-colored bean.”
Beyond the beaches, lush rainforest and teaming metropolises, one of the starkest attributes of Brazil to the foreign eye is the color of its soil. Much of it is so red it looks artificially dyed and that affects the crops grown in it, said Baize. It doesn’t affect the quality of the soybeans, but it does make Brazilian soymeal look “over-toasted.”
USSEC continues to work with Egypt, Morocco, Algeria, Saudi Arabia and other countries in North Africa and the Middle East — most recently at the grand opening of the Soy Excellence Center in Cairo — and Sutter stresses he doesn’t want to lose the new market share if the trade war between the U.S. and China ends.
“Hopefully we don’t only ship to China in the future,” Sutter said. “That’s not what we want to do. We want to have a diversified market for U.S. soy. We don’t want to lose the demand we’ve built in Egypt for U.S. soy.”
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