Rising Production Costs Derail Egypt's Oil Price-Cut Initiative

Egyptian consumers' relief over lower cooking oil prices proved short-lived. After a brief period of relative stability, a fresh wave of price increases has once again weighed on household budgets. The shift began in earnest when companies withdrew from a government initiative to lower prices on 2 November, just 60 days after it was launched.

Markets saw an immediate jump in wholesale and retail prices, with traders expecting further increases to come. This reflects mounting pressure from rising production costs tied to imported raw materials, squeezing the market between household budgets on one side and industrial costs on the other.

Price Jumps Across The Market

A field survey by "Economy Plus" recorded actual increases in the market, including:

• Wholesale prices of blended oils rose by between 3 and 5 Egyptian pounds.
• The price of a 1-litre bottle for some brands reached 70 Egyptian pounds, with retailers beginning to apply the increase from the start of the week.
• Retail shop owners said distributors had informed them of upcoming increases, although some old stock remained at the lower September prices.

In terms of carton prices, the following levels were recorded:

• Carton (700ml bottles): up more than 13% to 633 Egyptian pounds.
• Carton (1-litre bottles): rose to 864 Egyptian pounds.
• Carton (2.1-litre bottle): recorded 601 Egyptian pounds.
• Vegetable ghee (samn): the half-kilogram carton (12 units) rose to 424 Egyptian pounds, the one-kilogram carton (6 units) to 387 Egyptian pounds, while the one-kilogram carton (12 units) reached around 772 Egyptian pounds.

Behind The Crisis: Imports And Raw Material Costs

Ayman Qorra, a board member of the Chamber of Food Industries, attributed the crisis to Egypt's oil industry relying on imports for more than 90% of its raw materials. He explained that this dependence ties production costs directly to global exchanges, which have seen prices rise by around 15% between May and November this year. Qorra added that companies joined the price-cut initiative at a time when the dollar exchange rate was falling, but the sharp rise in global raw material prices has since wiped out those savings.

Supply And Consumption Data

According to data from the US Department of Agriculture, Egypt's consumption of soybean, sunflower and palm oils is expected to reach 2.49 million tonnes in the 2025/2026 marketing year, up 2.9% year-on-year. Egypt meets its vegetable oil needs either by refining imported crude oils or by crushing oilseeds domestically. Egypt's annual imports include:

• 9 million tonnes of yellow corn.
• 4.2 million tonnes of soybeans.
• 40,000 tonnes of sunflower oil.

Private Sector Losses And Competitive Pressures

Trade data show that average domestic prices for raw oils rose by more than 8,000 Egyptian pounds per tonne between May and November, with prices reaching the following levels:

• Soybean oil: ranged between 57,000 and 62,000 Egyptian pounds per tonne (for crude, degummed and refined grades).
• Corn oil: rose to 69,000 Egyptian pounds per tonne.
• Sunflower oil: reached 70,000 Egyptian pounds per tonne.
• Olein (blended) oils: climbed to 55,500 Egyptian pounds per tonne.

Qorra confirmed that private sector companies have incurred losses on blended oils by selling below cost, noting that profit margins in this segment are very thin (between 1% and 3%) and are heavily affected by price-cut initiatives. Companies also face fierce competition from subsidised "ration oil", with the Ministry of Supply distributing 70 million bottles a month to 64 million beneficiaries at fixed prices (30 Egyptian pounds for an 800ml bottle and 27 Egyptian pounds for a 700ml bottle), limiting the private sector's ability to fully pass on rising costs to consumers.

Source: Economy Plus