Fonterra is launching its Anchor brand in Egypt through a five-year deal with Arab Dairy.
Egypt has the highest population in the Middle East – 80 million people, over a third of them under the age of 14 – and consumes 470,000 tonnes of dairy product a year.
But Fonterra also views Egypt as a regional low-cost production centre which can act as a gateway to over a billion people in other parts of the Middle East and Africa.
Egypt has free trade agreements with regional markets which will reduce the import duties paid on Anchor products.
This deal will open doors to new markets for our produce but we may face opposition from local producers:
Separately, the Egyptian Government is reported to be preparing to pay local dairy farmers 100m Egyptian pounds in subsidies over three months, because farmers claim they cannot afford to reduce milk prices below the current price of 2.7 Egyptian pounds (NZ83c) per kilogram.
Yet another illustration that subsidies distort market signals.
How much easier it is to ask for a government handout than work out why your produce costs too much. It works in the short term but it’s expensive in the longterm becasue subsidies cost everyone twice – first as taxpayers and then again when they’re forced to pay more as consumers.