Unrest in Egypt

by Jay Sjerven and Arvin Donley
Share This:
In Egypt, where the Arabic word for bread (aish) is also the word for life, the importance of bread cannot be overstated. Egyptians are among the world’s largest consumers of bread per capita annually, and Egypt is the world’s largest wheat importer. It’s a nation of 80 million people, where one in five persons lives on an income of less than $1 a day and the government provides 14.2 million of its poor citizens with subsidized bread. The bread subsidy constitutes the underpinning of the Egyptian social safety net.

In 1977, what came to be known as the Egyptian Bread Riots broke out after the government ended its subsidies of basic food staples. Hundreds of thousands of Egyptians took to the streets, and hundreds were injured and dozens died during the protests. In 2007 and 2008, as food prices soared and food riots erupted in cities around the world, panic over a disruption in the supply chain of flour and bread in Egypt again unfolded into deadly protests.

In late January and early February of this year, hundreds of thousands of Egyptians staged a massive, sometimes violent political protest that in just 18 days led to the resignation of Hosni Mubarak, who had been the country’s president for 30 years. While soaring food prices have angered Egyptians in recent weeks, it was not the primary factor in this revolution. The people took to the streets to protest poverty, rampant unemployment, government corruption and the autocratic governance of the Mubarak regime.

The plan is for Egypt’s military to be in power over the next few months until elections can be held. It remains to be seen how this transition of power will impact the country’s ability to import wheat, transport wheat within the country, mill wheat into flour and ultimately distribute bread products to its people.

Nomani Nomani, vice chairman of the General Authority for Supply Commodities (GASC), told media outlets on Jan. 31 that Egypt had wheat stocks to last six months and even longer if the upcoming local harvest was taken into account, adding that Egypt was in a safe position regarding commodities.

While food stocks in Egypt — especially wheat — have been adequate so far this year, getting the food to the people often was difficult in the first few days of the protests because of chaos in the streets, a breakdown in truck logistics, makeshift roadblocks and curfews, according to media reports.

Long lines of people stood outside grocery stores and bakeries in Cairo, Alexandria and other cities large and small. As often takes place during natural or manmade disasters, there were incidents of food hoarding and price gouging.

At the same time, there were scattered interruptions of port activities at Alexandria and Suez, said a spokesman for the U.S. Grain Council, the market development arm of the U.S. corn, sorghum and other feed grain industries. But he said the chief difficulty was transporting grains from the ports to where they were required. Feed grain-consuming industries such as the nation’s poultry industry were working with inventories that, for the moment, were adequate but over time would need replacement.

While food prices have been on the rise worldwide and may emerge as a threat to security as in 2007 and 2008, the events in Egypt and other nations in North Africa and the Middle East have not been tied directly to escalating food prices. There were many factors and grievances involved in bringing millions onto the streets of Egypt’s cities.

Liliana Balbi, a senior economist at the United Nations Food and Agriculture Organization, said in the Wall Street Journal, “Definitely this unrest is not related to soaring food prices in general. It’s not like high international food prices have been transmitted to all the countries in the world as happened in 2008.”

Balbi said bread and cereal prices rose 2.42% in Algeria between November 2009 and the end of 2010, and bread and cereal prices in Tunisia, where the current wave of unrest was launched, rose only 3.5% in 2010. Those increases, while worrying, were not deemed sufficient to ignite the current political tumult. Indeed, in the case of Egypt, the government absorbed the increased cost of procuring essential imported foodstuffs , and the price advances seen in international commodity prices were not passed on to the nation’s most vulnerable. The bread subsidy remained intact.

But World Bank President Robert Zoellick said rising commodity prices are nearing the tipping point where food riots could once again become a problem, especially in impoverished areas such as the Middle East.

He said food price inflation has pushed an estimated 44 million people into extreme poverty since June and could spur fresh political unrest in the Middle East.

The bank’s food price index, which measures a basket of food commodities, increased 15% from October 2010 to January 2011. As of Feb. 17, prices were just 3% below their 2008 peak, which sparked food riots across many poor nations including Egypt and Yemen.

“Global food prices are rising to dangerous levels and threaten tens of millions of poor people around the world,” said Zoellick. “The price hike is already pushing millions of people into poverty and putting stress on the most vulnerable, who spend more than half of their income on food.”

Zoellick said the rising prices may aggravate the political unrest that is taking place in countries such as Egypt, Jordan and Tunisia.

“I’m concerned that higher food prices add to stress points and could add to the fragility that is already there anytime you have revolutions and transitions,” he said during a Feb. 16 press conference.

Wheat prices have almost doubled while the cost of maize increased 73% between June and January, he noted.

Egypt imports about 60% of its wheat needs each year. The government buys most of the wheat it needs from wheat exporters like the U.S., Canada, Russia and Australia. Because it’s so early in the year, millions of tonnes of purchased wheat for 2011 are still en route to the country.

For many years Egypt was ranked as the largest importer of U.S. wheat, but in recent years it increasingly purchased less expensive wheat from Russia and Ukraine, leaving the United States with a diminishing share of the Egyptian import wheat market.

With Russia and Ukraine months ago suspending wheat exports for the rest of the marketing year, Egypt again has turned to the United States for a significant portion of its wheat import requirements. Exports and undelivered sales of U.S. wheat to Egypt through Jan. 20 totaled 2,087,400 tonnes compared with 455,600 tonnes around the same date a year earlier.

The U.S. agricultural attaché in the American embassy in Cairo in late December forecast Egypt to import 3.5 million tonnes of U.S. wheat in 2010-11. This would amount to around one-third of the nation’s forecast wheat imports. Roger Janson, assistant vice-president of Cargill, Inc.’s grain and oilseeds supply chain for Europe, noted there recently has been an increase in wheat demand across Northern Africa but said this may not be attributed directly to political upheavals given crop shortfalls and heavy needs in the region that existed in any case.

“Egypt’s policy toward international companies, particularly in grains, won’t change at all,” said Ali Sharaf El Din, head of Egypt’s Chamber of Grain Industries, in a Dow Jones story. El Din said the country’s ports were open and shipments were being processed as usual. El Din said the country’s mills and bakeries were among the nation’s key institutions that remained open during the massive protests.

The Cairo office of U.S. Wheat Associates, which oversees the U.S. wheat industry’s export development activities across much of Africa and the Middle East, also confirmed that the political upheaval of recent weeks has not affected operations at the country’s flour mills.