Arab revolution of great importance for wheat
March 10, 2011
by Morton Sosland
A newspaper headline telling of “bread lines” in strife-torn Libya has spurred this page to depart from avoiding global political and military issues to comment on the huge and direct effect of the Arab revolution of 2011. After all, the countries where uprisings have resulted in the toppling of long-ruling autocrats or dictators register per capita consumption of bread that is probably the highest in the world. At the same time, many of these nations rely on imports to provide a substantial share of the wheat needed to supply relatively new domestic flour milling industries. In many cases, milling reached its present state only a decade or two ago, marking the end of the era when these nations ranked as the world’s largest importers of flour.
Yes, what is happening in North Africa and the Middle East is felt in wheat prices which almost always respond to political turmoil. After all, Egypt, one of the first of these countries where its leader left in response to democratic demands, is the world’s ranking importer of wheat. It’s too early to say just how a new government will conduct its wheat buying on behalf of separate and publicly-owned flour milling companies. That nation’s wheat imports this crop season were estimated just prior to the toppling of Hosni Mubarak at 10 million tonnes, nearly double the takings of the second-ranking importer.
The temptation is great in examining the grain situation in these countries to draw a comparison between wheat and crude oil. The uprising in Libya, a nation that is a relatively small supplier of oil to Europe, prompted one of the sharpest two-day advances in oil prices in the recent period of startling volatility. Libya has been a large importer of wheat flour for some years, ranking that nation at the top in that category in recent years. War-torn Iraq has been the main challenger of Libya as a wheat flour importer. Yemen, another nation where people have risen in protest, has ranked high as a flour importer. Large changes in the pace of takings by any of these nations are almost certain to reverberate through grain and grain-based foods.
Thus far avoiding significant domestic protests while being a central player in the region, Saudi Arabia makes its own special case when it comes to wheat, flour and bread. Once reliant totally on flour imports, the Saudi kingdom was one of the first in the region to build its own flour milling equal to domestic demand. Instead of importing wheat, the government decided a little more than a decade ago to guarantee domestic producers prices for wheat that were triple the international market in order to spur investing in irrigated farmland. After several years of this costly and water-wasting experiment, the Saudis reversed course with a halt to domestic wheat growing and a willingness to rely on imports.
Of course, the decision to rely on imports, which was hailed for both its economic and conservation sensibilities, collided with a market where prices have climbed on concerns about global supply adequacy. As a consequence, two new strategies have emerged that will certainly have great impact on the wheat market — adding sufficient storage space to boost stocks and acquiring cropland in other nations that could be used to grow wheat meant to protect Saudi domestic needs.
Yearnings for liberty and freedom, not bread lines, food shortages or food price inflation, are at the heart of the Arab revolution. Yet, the new leaders of every one of these nations are aware of the importance of adequate grain supplies to building the new nations and the new governments their people have fought for. As compared with dictators driven by ego and greed, the new leaders will obviously be guiding food policies along different paths. That alone would have the events currently under way in North Africa and the Middle East of huge significance for global grain business.