A tomato’s tale

Who de­cides how much you pay for your food at the su­per­mar­ket or the lo­cal fruit stand? In 2013, Busi­ness Monthly fol­lowed a re­cently har­vested crop of toma­toes on its jour­ney from a small Egyp­tian farm to a Cairo house­wife’s shop­ping bag. This month—with

Business monthly (Egypt) - - INSIDE - BY TAMER HAFEZ

From vine to ven­dor, how a tomato is priced.

As the sun sets on Mo­hamed Awad’s farm in Bader City, cast­ing golden rays over the tomato vines, he chews thought­fully on a piece of bread and white cheese his wife served him mo­ments ago and hopes for a good night. As hired field­hands har­vest the plump toma­toes, Awad silently cal­cu­lates the price at which he must sell his crop in or­der for his fam­ily to live com­fort­ably through the win­ter. Some 36 hours later, his toma­toes will ar­rive at their fi­nal des­ti­na­tion, more than 100 kilo­me­ters away in a dusty, bustling mar­ket­place in the Sayeda Zeinab dis­trict of Cairo, where a young house­wife named Safia makes her own men­tal cal­cu­la­tions. With toma­toes more than a pound per kilo more ex­pen­sive than last week, how many can she af­ford?

With Egypt’s cen­tral bank es­ti­mat­ing that fresh veg­etable prices shot up by 34 per­cent be­tween Jan­uary and Septem­ber, the gov­ern­ment in late Septem­ber ac­cused ven­dors of prof­it­ing from ex­or­bi­tant markups, threat­en­ing to fix prices if they failed to bring them un­der con­trol. As in many other places, toma­toes are a sta­ple fruit here, ap­pear­ing in items from street­side falafel sand­wiches to LE 100 pasta dishes in five-star Ital­ian restau­rants. Like other fresh items, how­ever, con­sumers com­plain that their price can fluc­tu­ate wildly from week to week—some­times even hour to hour—de­pend­ing on where they are sold and even who’s buy­ing them. Gro­cers ar­gue that they are only do­ing what’s nec­es­sary to make ends meet, that price hikes are sim­ply in re­sponse to ris­ing costs. The path that de­ter­mines that price, like that of many com­monly con­sumed fruits and veg­eta­bles in Egypt, fol­lows an en­trenched and largely un­reg­u­lated sup­ply chain that de­pends heav­ily on luck and guess­work. Squeezed by tough times, with lit­tle sup­port from the gov­ern­ment and ris­ing in­fla­tion, ev­ery one of its links—from the farmer to two layers of traders to the gro­cer and the house­wife on a bud­get—is strug­gling to do more with less.

The farm

“We are los­ing. And we are los­ing badly,” says Awad, a well-built man with a swarthy com­plex­ion in a worn gal­abeya, a third-gen­er­a­tion tomato farmer whose 10-acre plan­ta­tion lies some 40 kilo­me­ters west of Cairo. He com­plains that his prof­its have barely cov­ered his ex­penses since the global fi­nan­cial crash of 2008. While con­sump­tion is down, he says, gov­ern­ment sub­si­dized sup­plies like seeds and fer­til­izer are in­creas­ingly rare, and when they do ma­te­ri­al­ize, they are of­ten sub­stan­dard. This year, he re­sorted to buy­ing sup­plies on the open mar­ket at sig­nif­i­cantly higher prices. This state of af­fairs has forced him to choose be­tween plant­ing fewer toma­toes or fork­ing out more for his usual yield. This year, he planted less, end­ing up with a har­vest of around 1,000 crates, each con­tain­ing 20 to 22 kilo­grams of toma­toes.

A size­able por­tion of the crop never even makes it off the farm: bruised, squished or over­ripe fruit is de­clared

“tomato paste” and sold cheap to fac­to­ries or lo­cal restau­rants, fed to an­i­mals or thrown away. Last year, Awad lost nearly a quar­ter of his crop to mold, thanks to weak pes­ti­cide. Even if the har­vest is suc­cess­ful, Awad has a short win­dow of time in which he must sell his toma­toes if he hopes to cover his costs or turn even a mod­est profit, thanks to the short shelf life of toma­toes. “I know of farm­ers who have lost al­most half their crop,” he says, thanks to shoddy gov­ern­ment fer­til­izer or de­lays caused by ve­hi­cle break­downs.

As a re­sult, small farm­ers of­ten ne­go­ti­ate fi­nanc­ing schemes with traders in which the lat­ter cover farm costs up front. This ar­range­ment ben­e­fits farm­ers by shift­ing the risk to the trader, who in turn gets to over­see the crop from the plant­ing stage to en­sure he gets the high­est pos­si­ble yield. Awad has thus far re­sisted re­sort­ing to such a pa­tron­age scheme be­cause he sees it as a be­trayal of his fam­ily’s farm-own­ing legacy. But as costs for ev­ery­thing from seeds to fuel have sky­rock­eted, he may be forced to con­sider such a deal.

As evening de­scends on the red and green tomato fields, a fleet of bare­foot, over­all-clad teenage pick­ers spreads out among the vines, plac­ing the toma­toes one by one in wooden crates while tak­ing care not to bruise them or ac­ci­den­tally con­tam­i­nate the batch with rot­ten fruit. It’s mid-Oc­to­ber— tomato har­vest sea­son be­gins in July— and this will be among the last har­vests of the sea­son. An­other group of field­hands stacks and se­cures the crates. The pick­ing takes place af­ter sun­down to min­i­mize spoilage by avoid­ing trans­port­ing the toma­toes in the heat of the day. Awad over­sees his work­ers from the side­lines, anx­iously check­ing his cell phone ev­ery few min­utes for the ar­rival of the trader.

Around 10 p.m., an old pickup truck with rust­ing fend­ers and one work­ing head­light rum­bles up to the farm. Trader Said Mo­hamed gets out, dressed in a work shirt and jeans, un­cer­e­mo­ni­ously greets the farmer and wastes no time in head­ing over to in­spect the crop. Word­lessly, he picks a few toma­toes from the crates and ex­am­ines them for a few mo­ments be­fore mak­ing Awad an of­fer. The hag­gling goes on for sev­eral min­utes be­fore a price of LE 19 is agreed upon, slightly less than LE 1 per kilo. As Mo­hamed walks backs to the rick­ety ve­hi­cle to fetch the cash from a brief­case, work­ers have al­ready be­gun load­ing tomato crates onto the truck bed. Nei­ther of the two men com­ments on the deal, but Awad quickly winds up the trans­ac­tion and heads for his house wear­ing a somber ex­pres­sion.

It’s well af­ter 1 a.m. by the time Mo­hamed’s driver, a scrawny fel­low in a ragged gal­abeya, is en route to Oboor Mar­ket, the cen­tral de­pot for whole­salers of fruits and veg­eta­bles serv­ing all of greater Cairo. Mo­hamed sold his fleet of trucks a cou­ple of years ago af­ter sev­eral of them were hi­jacked fol­low­ing the 2011 rev­o­lu­tion. Now he sim­ply rents ve­hi­cles when he needs them, although this ar­range­ment comes with its own set of prob­lems: Truck rentals in Egypt are con­trolled by what is es­sen­tially a car­tel that com­pels traders to hire ve­hi­cles in var­i­ous states of dis­re­pair that are of­ten chauf­feured by reck­less driv­ers, not to men­tion de­void of re­frig­er­a­tion or other stan­dard fea­tures of trans­port­ing fresh pro­duce else­where in the world. Dur­ing the ap­prox­i­mately four hour jour­ney to Oboor Mar­ket—on which the truck rat­tles along at as fast a pace as Mo­hamed deems safe for the toma­toes—he sits perched atop his in­vest­ment, keep­ing an anx­ious look­out for road blocks ahead (it is long af­ter cur­few) or po­ten­tial ban­dits. (Com­pet­ing traders have been known to sab­o­tage trucks by hir­ing thugs to jump aboard pro­duce trucks from mov­ing ve­hi­cles and loosen the ropes se­cur­ing the cargo.) He frets about whether or not he’ll be able to re­coup the farmer’s price. If the truck doesn’t ar­rive in time or he mis­judged the qual­ity of the toma­toes, “I could lose a lot of money,” he says.

Fre­quent ac­ci­dents and hi­jack­ings and the gen­eral in­ef­fi­ciency that re­sults from the poor qual­ity of Egypt’s trans­porta­tion net­works have long been rec­og­nized as a bar­rier to do­mes­tic trade,

a prob­lem that has only got­ten worse in the re­cent cli­mate of in­se­cu­rity that has ac­com­pa­nied po­lit­i­cal un­rest. Back in 2010, Ahmed El Wakil, Pres­i­dent of the Fed­er­a­tion of Egyp­tian Cham­bers of Com­merce, sug­gested es­tab­lish­ing a vir­tual “stock mar­ket for fruits and veg­eta­bles” that would do away with sev­eral in­ef­fi­cient layers of mid­dle­men, en­abling re­tail­ers to buy di­rectly from farm­ers with­out hav­ing to move the crops to a cen­tral mar­ket­place, which he ar­gued would save time and re­duce waste and trans­porta­tion costs. But the idea never got off the ground. In an ap­par­ent ef­fort to ad­dress the poor state of do­mes­tic trans­porta­tion, of­fi­cials re­cently an­nounced that more power would be granted to lo­cal trade au­thor­i­ties to en­force road safety reg­u­la­tions for trucks trav­el­ing on high­ways, while stricter stan­dards would be in­sti­tuted for driv­ers, though they did not spec­ify a time frame.

The mar­ket

Mo­hamed al­lows him­self to breathe a small sigh of re­lief as the truck fi­nally pulls up to the toll-gate style en­trance of Oboor Mar­ket at dawn. The mo­ment is short-lived. Wait­ing his turn in the grow­ing queue of trucks piled high with fruits and veg­eta­bles, he pre­pares him­self for the cold-eyed ver­dict of the mar­ket, where he will soon learn if he paid too lit­tle or too much for his newly pur­chased toma­toes. He whis­pers ner­vously, “I am not very op­ti­mistic.”

Af­ter weigh­ing in and pay­ing the LE 7 per ton en­trance fee, Mo­hamed and his toma­toes join the chaos of the mar­ket, which at 140 acres re­sem­bles a typ­i­cal Egyp­tian pro­duce stand but on a far larger scale, with enor­mous piles as big as buses of tech­ni­color fruits and veg­eta­bles sit­ting atop wooden stands, some shaded by gi­ant palm fronds. By 6 a.m., peo­ple are run­ning along the nar­row al­ley­ways that di­vide the dis­plays, shouting, quar­relling, hag­gling, load­ing and un­load­ing. Oboor han­dles some 80,000 buy­ers a day, while around 361 tons of pro­duce change hands in a sin­gle hour. It is one of those places that looks fan­tas­ti­cally dis­or­ga­nized but in fact op­er­ates ac­cord­ing to an elab­o­rate, finely-tuned sys­tem in which trucks and peo­ple con­stantly move in and out, of­ten inches apart, with­out ever crash­ing into one an­other. The Oboor Mar­ket Au­thor­ity, a quasi-pub­lic body that main­tains the mar­ket­place fa­cil­i­ties, col­lects en­trance and exit fees from traders and rents com­mer­cial spa­ces to banks and small shops. Apart from that, the mar­ket is run en­tirely by the traders them­selves.

The Min­istry of Sup­ply and Do­mes­tic Trade in 1994 es­tab­lished the Oboor Mar­ket some 15 kilo­me­ters out­side Cairo to re­place the var­i­ous in­for­mal pro­duce mar­kets that were then spread out across the capital in neigh­bor­hoods like Shoubra and Ghamra. “In the old mar­kets, we were los­ing close to 50 per­cent of crops due to poor stor­age and smug­gling,” says Hussein El Se­baay, the head of the mar­ket au­thor­ity. “In Oboor we are

los­ing be­tween 5 and 6 per­cent.” The mar­ket has more than 2,000 plots ded­i­cated to ev­ery imag­in­able type of pro­duce, from ap­ples to zuc­chini, plus an­other 475 plots just for crates and bags. Stor­age fa­cil­i­ties cover 15 acres, in­clud­ing four enor­mous, walk-in re­frig­er­a­tors, and there is a 16.5-acre park­ing lot for trucks. There are also five banks (traders don’t like to leave the mar­ket car­ry­ing cash), a post of­fice, 36 shops sell­ing var­i­ous items such as phone charg­ers and scratch cards and 25 cafés as well as a po­lice and a first aid sta­tion at the cen­ter.

Toma­toes are the sec­ond big­gest crop at Oboor af­ter lemons (though they’re num­ber one in terms of the amount of fruit that’s moved), oc­cu­py­ing some 200 plots. Af­ter sev­eral min­utes of skill­fully ne­go­ti­at­ing the nar­row al­leys be­tween stands, Mo­hamed’s driver reaches the tomato sec­tion close to the heart of the mar­ket. Handy­men ma­te­ri­al­ize out of nowhere to un­load the newly ar­rived crop, as in­ter­ested traders gather to in­spect it. Af­ter some 15 min­utes, the traders agree on an ini­tial as­sess­ment of how many ki­los of toma­toes in each of Mo­hamed’s crates re­main fresh enough to sell, which wor­ries him fur­ther by be­ing some five ki­los less than he’d es­ti­mated back on the farm, mean­ing a fair num­ber had gone bad dur­ing the jour­ney.

Around 9 a.m., ev­ery­one falls silent as a stately fig­ure in a black over­coat ap­proaches. The traders gather around him, await­ing his re­ac­tion. This man is among the most pow­er­ful peo­ple in the mar­ket. Since the Fa­timid era, around the 10th Cen­tury, Egypt has main­tained a mar­ket­place tra­di­tion of ap­point­ing a re­spected head trader. Even to­day, such a fig­ure­head ex­ists for each crop traded at Oboor. Hany, bet­ter known as “Al Moalem” (“The Boss”)—no­body knows his last name—is the tomato don. Un­like most of the fruit dons, he is self-made, ris­ing up through the mar­ket­place ranks on his own af­ter get­ting his start at the age of 10 from his fa­ther, who was a whole­sale trader. At 64, he’s been the tomato don for decades—no one could say for sure for how long. He wears pressed trousers and a but­ton-down shirt un­der his over­coat, which has gold stitch­ing and nearly touches his shoes. With his in­tim­i­dat­ing gaze, he some­how seems taller than the other traders as he ap­proaches Mo­hamed’s ship­ment.

Af­ter in­spect­ing the prod­uct in si­lence for a cou­ple of min­utes, the tomato don calls out, sim­ply: “Twelve,” to the two dozen or so traders en­cir­cling him. Thus the min­i­mum bid is set at LE 12 per crate—about LE 7 less than the price paid by Mo­hamed, who sud­denly seems serene. The auc­tion com­mences, with a hand­ful of traders shouting out bids while shov­ing one an­other for a bet­ter po­si­tion nearer to the don. When the price reaches LE 31, the don waves his hand and de­clares the auc­tion over. Ac­count­ing for spoilage on the jour­ney, that’s about LE 2 per kilo. Mo­hamed, look­ing sat­is­fied,

col­lects his cash and dis­ap­pears.

While the don sys­tem might seem an­ti­quated, traders ar­gue that it ac­tu­ally pre­vents mar­ket ma­nip­u­la­tions. “There is no one per­son who can mo­nop­o­lize a cer­tain kind of fruit or veg­etable,” says Nemr Ab­dou, an Oboor whole­saler. Be­cause of the don’s long years of ex­pe­ri­ence and con­sid­er­able skill, he is trusted to es­tab­lish a price based on a crop’s fresh­ness and qual­ity. This pre­vents traders from col­lud­ing to hold prices down, thereby max­i­miz­ing their own prof­its. It is also his job to halt the auc­tion when he be­lieves the high­est suit­able price has been reached, pre­vent­ing mo­nop­oly-seek­ers from buy­ing out a sin­gle prod­uct and set­ting prices too high.

The tomato don him­self ex­plains that the key to the whole sys­tem is his rep­u­ta­tion. “I can’t force traders to buy or sell their prod­uct,” says the don, a man of few words who has a slight paunch and the tanned, leath­ery com­plex­ion of all veg- etable sell­ers. He ar­gues that this also pre­vents cor­rup­tion. “The auc­tion de­cides ev­ery­thing, and I can’t ask for a com­mis­sion off the sale, be­cause that would dam­age my rep­u­ta­tion,” he ex­plains. He ac­knowl­edges that the sup­ply chain for fruits and veg­eta­bles in Egypt is too cost-heavy in the middle, with too many layers of traders tak­ing a profit, mean­ing the start of the chain (the farmer) and the end (the con­sumer) both lose as a re­sult. But he is firmly op­posed to gov­ern­ment price fix­ing. The Oboor sys­tem works sim­ply be­cause it es­sen­tially op­er­ates on sup­ply and de­mand, he says. “In here, we don’t care about what has or will hap­pen on the out­side,” he says. “That is the job of the traders to cal­cu­late their own profit mar­gins.”

The fruit stand

By noon, our toma­toes have been de­liv­ered to Khaled Ali, a pro­duce re­tailer in his mid-30’s who, with his fa­ther, runs a size­able fruit stand at the El Naserya Mar­ket in Cairo’s Sayeda Zienab dis­trict. Ali has worked at the fam­ily fruit stand since he was a teenager, but this is his first time to run the Oboor Mar­ket tomato buy on his own; usu­ally he as­sists his fa­ther, a vet­eran ven­dor who’s been in the busi­ness for 40 years. Since trucks aren’t al­lowed in the capital un­til af­ter 7 p.m., Ali books a spot in one of the mega-fridges for sev­eral hours to keep the toma­toes—al­ready some­what di­min­ished in num­ber—as fresh as pos­si­ble. By evening, he de­parts the mar­ket along with other pro­duce trucks head­ing to ho­tels, restau­rant chains, su­per­mar­kets and else­where. (Un­less a re­tailer has a spe­cial ar­range­ment in which they get their pro­duce from a self­fi­nanced farm, for ex­am­ple, the fruits and veg­eta­bles con­sumed in Cairo all come through Oboor Mar­ket.) The fresh­est toma­toes, which com­mand the

high­est price, tend to go to gro­cers in up­scale neigh­bor­hoods like Za­malek or Maadi, where cus­tomers are able to pay more for them. Fruit that’s aged for a day or so, on the other hand, is usu­ally re­served for poorer dis­tricts where res­i­dents have less buy­ing power.

It is well af­ter dark by the time Ali steers his truck­load of toma­toes onto the nar­row, bustling streets of Sayeda Zeinab amid the beep­ing mi­crobuses and ar­rives at his fam­ily’s fruit stand in El Nas­reya, an open air mar­ket in which meat, fish and pro­duce is sold to the mostly poor and work­ing class lo­cal res­i­dents. He finds upon un­load­ing that he has lost an­other kilo or two in each crate dur­ing the trip, say­ing: “It’s not a bad loss, but we have seen bet­ter days.” He ar­ranges the toma­toes so the fresh­est ones are on top and re­places the price card read­ing LE 3.5 per kilo for last week’s toma­toes with one that reads LE 4. When his fa­ther comes by to in­spect the new fruit a cou­ple of hours later, he tells Ali to raise the price by an­other 75 pi­as­tres to al­low for likely but un­pre­dictable fluc­tu­a­tions to the whole­sale cost of toma­toes in the com­ing weeks. It’s bet­ter for busi­ness to set the price slightly higher and keep it con­stant than to change it ev­ery few days, ex­plains Ali. “We could lose a lot of busi­ness that way, be­cause peo­ple will think we’re crooks.”

Thus, the fi­nal price of farmer Mo­hamed Awad’s toma­toes is de­ter­mined. From LE 1 at the farm, to LE 2 at Oboor, and fi­nally LE 4.75, which Safia, a house­wife in a black kh­mer, must some­how man­age to squeeze into her weekly gro­cery bud­get. She knows she needs around two ki­los of toma­toes to pre­pare sauces and sal­ads for sup­per and white cheese and tomato sand­wiches for her two young sons and her con­struc­tion worker hus­band to eat for lunch for the next 10 days. Al­most LE 10 for toma­toes, how­ever, is more than she can af­ford. Food prices tend to go up in the Fall, as kids go back to school and the weather turns colder, while sum­mer crops dwin­dle and win­ter ones haven’t quite come into sea­son. Ali says many cus­tomers have cut back on fresh pro­duce lately, es­pe­cially as they’ve be­come no­tice­ably more ex­pen­sive. In four days or so, he’ll have to throw away what­ever hasn’t been sold of Awad’s tomato crop. He de­clares: “The low de­mand is putting our prof­its at risk.”

For Safia, mean­while, the re­al­ity is that buy­ing enough toma­toes to feed her fam­ily for the next week and a half will have to mean for­go­ing some­thing else. In the end, she de­cides in­stead to pur­chase a half a kilo less than usual, which will mean serv­ing three meals a week of boiled veg­eta­bles with­out any sauce, a prospect she doesn’t par­tic­u­larly like and knows her fam­ily of four won’t ei­ther. But she rea­sons that, like ev­ery­one else, “We are get­ting by.”

Cover De­sign: Nes­sim N. Hanna

PICKED CLEAN: A TOMATO FARM IN ORABI ON THE OUT­SKIRTS OF CAIRO SITS EMPTY OF FRUIT AS THE HAR­VEST SEA­SON DRAWS TO A CLOSE. SMALL FARM­ERS IN EGYPT ARE STRUG­GLING TO DEAL WITH RIS­ING SUP­PLY COSTS.

FOOD CHAIN: MOST LO­CALLY GROWN PRO­DUCE TAKES A LIT­TLE OVER 24 HOURS TO GET FROM THE FIELD TO THE MAR­KET PLACE.

PRE­CIOUS CARGO: WORK­ERS AT OBOOR MAR­KET MUST RACE TO UN­LOAD TOMA­TOES FROM UNREFRIGERATED TRUCKS BE­FORE SPOILAGE SETS IN.

SPOILT FOR CHOICE: THE BEST TOMA­TOES ARE SE­LECTED FOR MAR­KET RE­SALE, WHILE THE DREGS ARE MADE INTO KETCHUP OR TOMATO PASTE.

CREAM OF THE CROP: THE FRESH­EST PRO­DUCE TENDS TO WIND UP IN UP­SCALE AR­EAS, LEAV­ING LOWER QUAL­ITY BATCHES FOR POORER NEIGH­BOR­HOODS.

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