Egypt’s agricultural sector is and will continue to face unprecedented challenges as climate change, water scarcity, and land shortages threaten production and profitability, according to a recent report (pdf) on the country’s agribusiness sector from Fitch Solutions’ research unit BMI.

AGRIBUSINESSES ARE FACING CHALLENGES ON MULTIPLE FRONTS-

A warming climate is taking its toll on Egyptian agriculture: Egypt is particularly vulnerable to climate change, with “increased temperatures, changes in precipitation patterns and the potential for more frequent extreme weather events, [posing] a significant long-term risk to Egyptian grain production.” The report warns that heat stress is already leading to lower yields for key crops like wheat and rice. The increased frequency of droughts and heatwaves is also expected to accelerate desertification, further reducing the amount of arable land available for cultivation.

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Water scarcity is also a looming crisis for Egyptian farmers: Egypt’s reliance on irrigation-intensive farming makes water scarcity one of the biggest threats to its agricultural sector. The country already ranks among the most water-stressed nations globally, with annual per capita water availability standing at just 560 cubic meters — well below the UN’s 1k cubic meter threshold for water stress. In 2018, the country’s total freshwater resources “stood at 64.2 bn cubic metres, which implies a water stress ratio of 116.2%,” the report warns. The UN had foresaw that “Egypt could be approaching an ‘absolute water crisis’ by as early as 2025,” the report reads. “Pressures on water supplies and land resources are set to become more acute in Egypt through the medium term, which will require a concerted management effort if domestic production is not to fall,” the report warns

REMEMBER- Egypt faces an annual water deficit of around 7 bn cubic meters and could see its water resources run out in 2025. By 2030, Egypt is expected to import more freshwater — through virtual water trade — than the volume of locally supplied water from the Nile.

GERD remains a key factor in Egypt’s water security: The Grand Ethiopian Renaissance Dam (GERD) continues to cast uncertainty over Egypt’s future water supply, with the report warning that Ethiopia’s ongoing filling of the dam, “the pace of the fill, as well as the frequency of subsequent refills, will be a critical determinant of the impact of the GERD on Egyptian water supplies.” This would have profound implications for irrigation, potentially leading to lower yields, particularly for water-intensive crops like rice and sugarcane. The Madbouly government’s efforts to mitigate the impact feature investments in modern irrigation techniques and water recycling initiatives, but concerns remain over the long-term stability of the country’s agricultural output, according to the report.

The bigger fear is “the impact of filling the dam in the wake of a drought,” the report warns. The government had relied on the High Dam water reservoir “to make up for the reduced Nile River flow but this represents a limited, unsustainable solution to reduced flow rate.”

REFRESHER- Egypt, Sudan, and Ethiopia have been unable to agree on how to divvy out the Nile’s water resources following the construction of the USD 4.6 bn dam, which Egypt says presents an existential threat to its water security. Central to the dispute is the timetable for filling the GERD’s reservoir and how much water Ethiopia will release as the dam becomes operational. Ethiopia has been unilaterally filling the reservoir over the past three years without a binding agreement, angering Cairo which in 2021 pulled out of African Union-led negotiations.

Land scarcity is another point of concern for the sector: The expansion of urban areas and population growth on the expanse of the country’s arable lands are further straining Egypt’s agricultural resources. Most of Egypt’s lands can’t be cultivated, and the few arable lands we have are mainly dependent on the Nile as a water resource. The report warns that efforts to ramp up land reclamation will clash against “population growth and urbanisation.” It will also cause other unwanted outcomes, “related to water use, soil degradation and desertification.”

Existing arable lands are also at risk: BMI also warns that “the failure to generate sustained, meaningful yield improvements represents a severe challenge to structural output growth over the medium term,” with over-application of nitrogen-based fertilizers worsening soil conditions of arable lands, rather than improving them.

** We dove into the details and the causes leading to irreversible soil degradation in a previous Going Green.

This all comes as Egypt is trying to reduce its reliance on food imports: Egypt’s push for food self-sufficiency faces major obstacles, particularly given its heavy dependence on imports for staples like wheat. The report indicates that Egypt imported 12 mn tons of wheat in 2023, making it the world’s largest wheat importer. The float of the EGP last year has further driven up food import costs, compounding inflationary pressures and increasing food insecurity risks. The ongoing conflict in Ukraine has also disrupted global grain supply chains, underscoring the vulnerabilities of Egypt’s reliance on imported foodstuffs.

SOME CROPS AND AGRIBUSINESSES WILL BE AFFECTED MORE THAN OTHERS-

Climate change is already slashing the yields of some crops: The report highlights that key commodities such as wheat, rice, and maize are already experiencing declining yields, while more extreme weather events like heatwaves and droughts could exacerbate the problem. Higher temperatures are expected to shorten growing seasons, further reducing output and placing additional strain on Egypt’s food security. The country’s reliance on staple crops makes this an even more pressing issue. “We expect output growth for key cereals to remain subdued over the medium term,” BMI notes, citing climate-related disruptions as a leading factor.

Wheat and rice production projections show mixed results: BMI forecasts that Egypt’s wheat production will grow modestly to 9.2 mn tons in 2024-25, narrowing the wheat production deficit from 11.63 mn tons in 2023-24 to 11.51 mn tons. “We have revised down our forecast for Egyptian corn production in 2024-25 from 7.65 mn tons to 7.2 mn tons due to above-average temperatures during the growing phase,” BMI notes, citing a projected domestic corn deficit of 8.4 mn tons — the widest in three seasons. Meanwhile, rice production is expected to hit 3.9 mn tons in 2024-25, but the government’s plans to limit water use could see rice output drop significantly in 2025-26. “The prospect of such a course of action poses a major downside risk to rice production in Egypt,” the report warns.

Sugar faces mounting challenges: Egypt’s sugar sector is under pressure, with BMI noting that “sugar self-sufficiency in Egypt fell from 83.1% in 2022-23 to an estimated 72.8% in the now complete 2023-24 season.” This decline was driven by lower-than-expected production and resilient domestic consumption, which rose to a record level despite high prices. The sugar deficit widened to nearly 1 mn tons in 2023-24 — its largest in over a decade. Looking ahead, “the share of total sugar production accounted for by sugar beet will continue to rise, as it is a less water-sensitive crop than sugarcane,” BMI states. However, water scarcity remains the primary risk to the sector. The report projects a 2.9% increase in sugar production in 2024-25, but overall self-sufficiency is expected to remain below historical averages.

Dairy and livestock sectors struggle with supply chain disruptions: BMI expects Egypt’s dairy sector to remain under pressure as local production struggles to keep pace with demand.

“Milk production growth in Egypt will ease to 0.5% in 2025, with total output expected to increase from 5.15 mn tons to 5.17 mn tons, its highest value since 2021,” the report states. Meanwhile, demand is set to hit a record 5.01 mn tons in 2025, further tightening supply. Egypt’s beef production is forecast to reach a 10-year high of 455k tons in 2025, though demand will continue to outstrip supply. Meanwhile, “Egyptian poultry production is expected to increase by 4.5% to 2.09 mn tons in 2025, its highest level since 2021,” but self-sufficiency is set to decline to 93.8%, the lowest since 2017.

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