Egypt said on Sunday it would pay its local farmers a fixed price of 420 Egyptian pounds ($53.64) per ardeb (150 kg) of wheat in the new local procurement season starting in April, backtracking on reforms to its wheat farmer subsidy system.
Egypt had said in November it would start buying wheat from its farmers at the average global price starting in the 2016 season, which begins in April, and grant a direct cash subsidy of 1,300 pounds per feddan (roughly an acre) of wheat grown.
The decision, however, to fix the prices - and at a level higher than global markets - came after a meeting that included the prime minister, the supply minister, the agriculture minister and the finance minister, a cabinet statement said.
"Of course this is a reversal of policy, its a fixed price that has been announced much higher than global prices," an Egyptian government official, who asked not to be named due to the sensitivity of the topic, told Reuters.
Previously, the world's largest wheat importer, had paid its farmers a procurement price well above global markets in order to encourage them to grow the grain. But the high price that Egypt pays for its local wheat has led over the years to a smuggling business, where foreign wheat is sold to the government, mostly Russian, falsely labelled as Egyptian.
The smuggling was mostly done by middlemen who bought the wheat from farmers and then went on to sell it to the state.
The cabinet statement said a committee would be formed by representatives of the Agriculture Ministry and parliament in order to make sure the wheat was being purchased directly from the farmers without middlemen.
The new, now shelved, farmer subsidy system was designed to tackle the smuggling problem. Traders have said as much as 1 million tonnes of the 5 million bought in the 2015 season were foreign wheat and 400,000 tonnes were Egyptian wheat stored from the 2014 season.
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