The Egyptian government announced in 2007 that it planned to liberalise the fertiliser market, along with long-term plans to reform the agricultural sector, which has for decades been heavily subsidised by Cairo to ensure cheap basic foodstuffs are available for the country’s poor, of which there are an estimated 10 million.

However, since the government announcement there has been no discernible progress on the planned liberalisation of the Egyptian fertiliser market. Currently, under the country’s fertiliser subsidy system, the state-owned Bank for Development & Agricultural Credit provides subsidised fertiliser to farmland owners, which acts as a major obstacle to any meaningful liberalisation of the sector.

If the government’s reforms go ahead, they will enhance profit margins for Abu Qir Fertiliser Company and other state-run producers, as they will be able to benefit from selling on the global market, where prices are up to 40 per cent higher than in the domestic market. Prices for locally produced fertilisers are kept artificially low because of the government’s part-ownership of manufacturers such as Abu Qir.

Local farmers, however, have opposed the proposals to reform the sector, pointing out that fertilisers account for up to half their costs.

The strength of this opposition should not be underestimated, and could mean liberalisation of the fertiliser sector in Egypt could take many years, possibly removing the business -incentive for Abu Qir to expand its operations further. 

The outlook for the fertiliser industry in the Middle East and North Africa remains positive on the back of sound fundamentals - cheap gas feedstock and a growing population that is generating demand for domestically grown produce. In the short term, it is unlikely there will be a repeat of the impressive figures reported in 2008, when Abu Qir’s revenues were £E2.2bn, a figure that is expected to dip to £E1.7bn in 2009.

Nonetheless, most fertiliser industry sources predict companies such as Abu Qir will continue to post strong profits. A focus on innovative farming techniques and the drive to increase agricultural yields in the region continue to bode well for the sector.