An Assessment of the Impact of Wheat Market Liberalization in Egypt; A Multi-Market Model Approach

Wheat is central to the government of Egypt’s food security policy which is influenced by a concern for overdependence on imports and the need to provide subsidized bread for the poor. This paper uses a multi-market approach to assess the impact of complete wheat market liberalization, an international wheat price increase, the value of strategic stocks and the impact of investment to generate higher yields and lower transaction costs for wheat producers. Results show that wheat market liberalization implies very substantial costs for consumers and producers. The estimated income losses that these groups suffer would appear to be below the current total subsidy costs and hence a cash transfer program would, in principle, be feasible. The results show that wheat price movements impact strongly on the supply and/or demand side in particular of berseem, rice, maize, cotton and livestock which has significant implications for their net imports as well as input use. Results indicate that strategic stocks can be useful to neutralize the impact of a wheat price spike. Increasing wheat yields and reducing transportation boosts wheat self-sufficiency but does not dampen the impact of removing the wheat subsidy system on household’s welfare.