Egypt: Smallholder contract farming for high-value and ... - IFAD

Organic production
Smallholders involved in producing for the Sekem Group and Agrofood Egypt are mainly desert
farmers located on new land of a minimum of 5 feddan each. Because the land of these farmers
has not previously been cultivated, there is no conversion time from conventional to organic
production. However, there are also smallholders on old lands who are involved in organic
production under the Agricultural Exports and Rural Incomes Project initiative. It has been reported
that these smallholders actually achieve yields similar to the yields of conventional farmers, but
that these smallholders need significant technical assistance and that not all the produce can be
sold at a premium, for example, there is no market for milk and meat in Upper Egypt, and the
logistics in transporting these products to the metropolitan area for sale to the Sekem Group is too
costly because of the low quantities. The smallholders located closer to the Sekem Group have a
market for their entire production, including milk and meat. It is not feasible for smallholders to
initiate organic farming without contractual arrangements with buyers who are able to purchase all
the output of the farms. A well-organized exporter would be able to sell the non-exportable
produce (milk and meat) to the hotel industry if the supply is constant.
Comparison of produce handling
Traditional domestic value chains are experiencing huge post-harvest losses due to the lack of cold
chains. This exposes produce to the sun during many hours of transport in ambient temperature,
resulting in the deterioration of the condition of the vegetables, which is aggravated by the bruising
caused by poor packaging. The unhygienic packaging, together with the ambient storage at
wholesale markets, also speeds up the deterioration of the vegetables. To reduce these losses, it is
necessary to imitate the export value chains, in which produce is moved from producers all the way
to end-users who reside as far away as Europe. This would require considerable investments in cold
chains, including pre-cooling plants and storage and refrigerated transport to retailers.
The recently organized shipping lines connecting the port of Alexandria to European ports
without intermediate stops have increased the flexibility and reduced the costs of horticultural
produce exporters. Alexandria is the last port of call before the ship arrives in Europe. It is therefore
necessary to book cargo space well in advance to ensure sufficient space on vessels upon arrival in
Alexandria. If space is ensured, these shipping lines are reliable for the shipment of perishable
produce such as grapes, strawberries and green beans.
When the cold chain facility at Luxor airport opens, it is expected that horticulture production in
Upper Egypt will grow rapidly and will be accelerated when the planned private Italian investment
in additional cold chain facilities is concluded. This growth would likely warrant the organization
of shipping lines to call on the Red Sea ports, which are around 150 kilometres from Luxor and
which represent an additional incentive for the production of horticultural crops in Upper Egypt.
The produce could then be moved by refrigerated sea containers to Europe less expensively relative
to the cost of using Alexandria port, which is 800 kilometres away and requires road transport.
Box 4 Plant extraction in Egypt
Egypt is one of the world’s major suppliers of high-quality pharmaceutical plants. However, the local
pharmaceutical industry makes hardly any use of these raw materials. The companies generally use imported
extracts from Europe instead of utilizing the more than 1,000 domestic plant species with pharmaceutical and
cosmetic potential. Atos Pharma was established in 1986 as a joint venture company of the Egyptian private
exporter the Sekem Group and the Deutsche Investitions- und Entwicklungsgesellschaft to develop the
Egyptian natural pharmaceutical market. Atos Pharma has recently developed a pilot project that is in field
trial; through the project, plants are cultivated, and the most favourable seeding and harvesting times and
extraction procedures are tested. This public-private partnership project opens up valuable sources of raw
materials for Atos Pharma, while contributing to more effective utilization of local resources. The results and
lessons learned are highly promising for production scaling-up among small farmers.
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