Concentrate Feed Mix in Egypt: An Analysis of Government Production and Distribution Policies, and Free Market Price Patterns

This paper investigates the production, distribution and policies for feed concentrate mix, a vital source of livestock feed in a country which suffers from chronic feed shortages. Feed concentrate is particularly important during the summer months when fodders are particularly scarce. The Ministry of Industry manufactures feed concentrate under a formula specified by the Ministry of Agriculture, and designed to take advantage of available local crop by-products, including cottonseed cake, brams, and molasses, while providing a balanced and nutritious livestock Diet. The feed mix program also involves decisions of the Ministry of Supply, which imports the yellow maize component, and governorate agencies which are involved in distribution. The government has had a long standing policy of providing the feed concentrate at fixed prices which are substantially lower than the international value of the components involved. In 1975, for example, the international Cost of such feed would have been at least L.E. 97, compared to the L.E. 30 per ton price charged to producers by the government. Thus, in effect the feed concentrate was subsidized by more than L.E. 60 per ton. At the low price, there is not enough of the feed concentrate available to meet livestock producer demands. The government therefore must allocate the concentrate according to a quota system. As a result, a black market exists for the feed concentrate. The 1976-77 Farm Management Survey showed that the black market price is typically over L.E. 60, or almost twice as High as the controlled distribution price. This indicates that some producers And middlemen are making money by merely reselling concentrate to producers who have requirements in excess of their quotas. The government's quota system for distributing the concentrate follows a specific list of priorities which gives first precedence to state farms and specialized producers who have contracts to deliver meat and milk to public sector companies. In this system, the small farmers who hold the majority of Egypt's livestock and who usually specialize in. livestock production more than large farmers have the lowest priority. Small farmers are known to be net purchasers of fodders, and, because of their low quotas, they are probably net purchasers of black market concentrates. Farm Management survey data showed that the black market prices are lower in villages which have specialized feedlot production units and they are also lower in villages nearer to governorate capitals. This indicates that governorate capitals and feedlots are likely sources of black market supply. Free market prices were found to be much higher in the summer months and lower in villages which have higher than average berseem and barley acreages. Although these findings indicate that there is a serious misallocation of feed resources in a strictly economic sense, there is not yet enough information available to suggest better alternative policies. It is likely that altering the quota system to give equal treatment to small farmers could make substantial increases in meat and milk production, but it is not clear that local marketing facilities are adequate to translate this production into increased urban supplies, which is the obvious objective of the current quota and price system. Thus, there is a need for continued studies-dealing with these and other questions raised in this paper.