February 1, 2011 | 20
Even with government subsidies and ration cards for bread, the true price of wheat in Egypt is nearly 30 percent higher today than it was a year ago—thanks to global prices for that staple cereal that have increased nearly 80 percent in the same span. In more common terms, that means 5 piester (less than 1 cent) bread is no longer available and 60 piester bread is now 70 piester, or more than 12 cents, says Cairo-resident Om Massad in a Bloomberg report from Egypt‘s largest city. Already, Egyptians spend more than 40 percent of their monthly income on food, according to a recent consumer survey from Credit Suisse.
Back in 2008, skyrocketing wheat prices prompted bread riots in Egypt—and the government reacted with an expanded subsidy program that has kept food prices relatively stable. But Egypt remains dependent on imported wheat for 60 percent of its supply of that grain; and the supply of wheat internationally has been affected by everything from Chinese drought to Australian floods as well as hoarding by countries, like the export ban imposed by Russia after its devastating drought this past summer. Such hoarding and export controls helped exacerbate food riots the world over in 2008—and have prompted the U.N. Food and Agriculture Organization to warn nations in a policy guide to avoid policies that might "aggravate the situation."
"The experience of the 2007-2008 food crisis shows that in some cases, hastily taken decisions by governments to mitigate the impact of the crisis, have actually contributed to or exacerbated the crisis and aggravated its impact on food insecurity," said Richard China, director of FAO’s Policy and Programme Development Support Division in a statement on the guide’s release. "Export restrictions, for example, applied by some surplus food-producing countries, exacerbated the global food market situation during the 2007/2008 crisis. FAO strongly advises against such measures, as they often provoke more uncertainty and disruption on world markets and drive prices up further globally, while depressing prices domestically and hence curtailing incentives to produce more food."
Regardless of the world market, the 80 million or so Egyptians are among the world’s largest consumers of bread and, to make things worse, roughly half of Egypt’s own wheat stockpile was rendered inedible by insects this past summer, according to Egyptian newspaper Al Masry Al Youm‘s English edition.
Obviously, the current revolution in Egypt did not have one cause, but there is no doubt that rising food prices added fuel to an already combustible mix. And it is also clear that Egypt—and Tunisia before it—are not alone; world food prices in January were close to surpassing December’s levels, which were record highs and above those that prompted food riots in 2008, according to FAO. That could ultimately prove more destabilizing to regimes than any invasion or other calamity. Already countries such as Algeria, Jordan, Libya, Morocco, Saudi Arabia, Turkey, Qatar and Yemen have been snapping up supplies of wheat in the world market to forestall any hint of food price spikes—or regime change.
Ultimately, Egypt may have an outsized impact on the price of wheat: 8 percent of global trade passes through the Suez Canal. If unrest in Egypt closes the canal, the price of commodities from food to oil could go even higher.
Image: © iStockphoto.com / Nour El Refai