Sonac, anEgyptian exporter based in Alexandria is about to finish its potato season.However, according to Export Manager Dalia Gamal, the current situation of the potato sector isn’tas good as it should be. The prices for potatoes are low, which has led tolower than usual production volumes. And due to these circumstances, the marketfor potatoes has been rather weak in both this season and the previous one.
She alsoadded that most of the volumes in Sonac are based on contracts that were agreedupon beforehand with her customers. The model of contract farming has becomebest practice for most potato growers in Egypt, instead of offering potatoeson the spot.
Contractsfor potatoes are set up on a year by year basis. The citrus sector works in asimilar way, but makes use of contracts that last for longer terms than asingle year. For most Egyptian companies such long term contracts arepreferable, as they provide a framework through which a company can decide howmuch it wants to invest, what kind of facilities like cold storage it is goingto need, etc.
“When youoffer potatoes on the spot, you’re going to be under market pressure. Therereally aren’t any disadvantages to contract orders as opposed to spot orders.All markets in the world right now are under economical stress, which makescontract farming a safe bet,” explains Gamal.
The mainmarket for potatoes is Russia.However, the Russian trade ban has caused problems for the European market. Europe right now depends on their domestic plantationsand has less need for Egyptian potatoes. The same goes for Russia itself,as it suffers from the economic situation caused by low exchange rates. Overall,the market for potatoes has shrunk. The acreage for growing potatoes in Egypt hasdiminished as well and there is a lot of pressure to find new long termcontracts.
“The futurefor citrus is very bright, but for potatoes, not so much,” concludes Gamal ofSonac.
For more information:
Dalia Gamal
Sonac
Tel 00203-3939555
Email delgamal@sonac.net
http://www.sonac.net
Author: Juan Zea Estellés / Yzza Ibrahim