As the world’s largest wheat importer, Egypt has been hit hard by Russian’s export ban on grain [see A cruel, hot summer]. The North African nation relies heavily on Russia for its wheat imports, as Egyptians consumed roughly 9 million tons more wheat than they produced last year.
The ban, which is to run until the end of December, canceled 540,000-tons in Russian deliveries between August 1 and September 10. Egypt then rushed to secure contracts with France and Canada totaling some 600,000 tons, at an average price of $280 per ton, compared to the $183 per ton it paid Russia in July.
Egyptian Trade Minister Rachid Mohamed Rachid said the ban on Russian wheat imports would cost the state up to $877 million. He also said that Egypt has wheat stockpiles which will last up to five months, even factoring in the increased bread consumption typically seen during Ramadan. Still, a long-term international price hike would eventually trickle down to consumers and affect the prices of other staples, such as corn and rice.
“[Higher wheat prices] would greatly impact the urban poor, so [governments] will be very careful,” said Abdolreza Abbassian, senior grain economist at the United Nation’s Food and Agriculture Organization.
The memory of the 2007-2008 global food crisis is still fresh in Egypt, when bread prices doubled after the price of wheat tripled on the global market, leading to social unrest and violence in some areas. Up to a quarter of Egypt’s 80 million people survive on less than $1 per day, and any upward motion in prices is hard-felt.
The Egyptian government subsidizes some basic food items, including bread, to the tune of 8.5 percent of GDP, but aims to scale this spending back in favor of health, education and other social services. However, in August, when an impending wheat crisis became apparent, Solidarity Minister Ali Musailhi announced: “We have no intention of raising the prices of subsidized commodities.”
Though not as dire as the crisis of two years ago, the current wheat shortage should hammer home the need for Egypt to increase its food security measures. On August 15, Russian press reported Egyptian Agricultural Minister Amin Abaza as saying that “Egypt will follow a strategy of reducing bread consumption and increasing [grain] production.” He added that Egypt aims to meet 70 to 75 percent of its consumption needs by domestic production.
In recent years, the country has focused on growing high-value crops such as figs, green beans, spring onions and melons for European markets, while importing the commodities it lacks a competitive advantage in producing. Russia, for example, can produce wheat far more cheaply due to Egypt’s water constraints. But this model has proved unviable, as it leaves the population hurting for staple foods in times of global shortages.
For now, Egypt is said to be in talks with the United States, Canada and France to diversify its import sources away from Russia, Ukraine and Kazakhstan for the remainder of the year. Additionally, a free-trade agreement signed in August with the South American trade bloc Mercosur should enable Egypt to import from Argentina, another major wheat producer.
In the long term however, increasing overall agricultural production, especially of grains, is needed for Egypt to become less reliant on food imports and more resilient to price shocks. This is easier said than done in a desert nation, but a large-scale land reclamation program is in the works to create more arable land. With explosive population growth in the developing world, global food supply is only going to contract in the coming years, and Egypt would be well-served to speed up investment in its agricultural future.
