Russia goes on fire; no more wheat to Egypt. Oh God, no! Mama America! Dear France! Would you please help again?
It’s the same repetitive Egyptian drama, an ongoing chronic problem dating back to the 1960s. Egypt is still unable to find a solution to the serious challenge of feeding the nation.
Again bread shortages pop up as top news. At the end of last August another scene in the ongoing wheat drama played out when around 150 political activists organised a protest against what they called the “bread crisis.”
Egyptian fears were aroused immediately on hearing the news that Russia was suspending its wheat exports to the rest of the world, including Egypt. The Egyptian government panicked and quickly engaged in negotiations with other producers. France and Canada were the first to win contracts worth 24,000 tons, to be delivered between 1-10 October- impressively quick!
What might be really worrying is the bread subsidy system itself, which could be under threat. The centrepiece of the country’s social safety net, food subsidies amount to around 1.8% of Egypt’s GDP. Free market advocates have always been very vocal against food subsidies in an effort to reduce the country’s deficit, which has recently hit LE99 billion.
Maybe they don’t know, economically speaking, that bread is a strategic good for Egypt. It can be scientically labelled Egypt’s Giffen good: one which can spark a popular political mess across the country.
Maybe they didn’t hear about the bread riots of 1977, when President Anwar Sadat considered lifting bread subsidies.
The current situation is not a new one: We always face the same drama every now and then. Sometimes for political reasons and other times purely economic, but we never take a step forward toward a solution.
The US has always played the wheat game with Egypt, the same classic carrot and stick humiliation. They banned exports once before, clearly as a punishment for Egypt having built the High Dam without their approval in the late 1950s.
Again back then, the government asked the Russians for help in avoiding a likely famine, and help they did.
Wheat producing countries have always played this political food game. And since the July revolution in 1952, we have always known it. But we never learned the lesson, repeating the same mistake with different countries during different periods of time up until today.
Egypt’s local production of wheat is about three million tons planted over 3.1 million hectares, which only represents 40% of its domestic consumption.
It is asked over and over: Why doesn’t Egypt adopt a national, ambitious programme to achieve self-sufficiency in wheat? A number of independent and opposition voices, and even voices from within the government, have been calling for such a programme.
Some insist that Egypt is capable of achieving self-sufficiency once the political decision is taken. But unfortunately this call has always found nothing other than an answering machine. Once upon a time, there was a plan, never implemented, to reclaim 3.5 million hectares and use it to grow 12 million tons of wheat. This was a dream that never came true.
Hans Lofgren, a Middle East economist, wrote a paper with a group of researchers titled Reforming Egypt’s Wheat Policy, which advises the government to focus on supporting agricultural development research.
It says that government investment in developing different high-yielding grades of wheat would not only increase productivity and farmers’ incomes- it would also help to provide wheat for bread, and thus reduce the subsidies directed toward it.
Egypt uses 13 million tons of flour per year to produce 220 million loaves of subsidies bread every day. Twelve percent of this amount goes directly to animal feed since it’s cheaper than fodder, in the absence of a smartly directed subsidies strategy.
Under the current challenging situation and despite the fact that bread is a Giffen good, talk is greater than ever before about the probability of future significant changes in the way subsidies are allocated. The LE16 billion food subsidy bill seems to be really burning the government’s seat.
Since the revolution’s early times there has always been concern about the danger of dependency on wheat imports, but nothing has been achieved to resolve this. Lately, it seems that the concern does not exist anymore, as if the problem is happening in another country. The worry now is all about which country to import from.
The past decades brought us some funny official ideas regarding this matter, as some say that importing wheat is better than producing it. According to this opinion, planting other profitable crops will help us import more wheat! Have they forgotten that it is such an extremely politicised crop, both locally and internationally? Simple supply and demand economics would never apply here.
Ironically, decision makers took the issue seriously years ago. A single example from among many is the massive growth in strawberry production. Have we really been successful in teasing the world with our delicious strawberries, seducing them into providing us with wheat, no strings attached? Simply, the answer is no; Food gamed are not played in this naive way.
Water is another excuse, especially with the current additional complication of the fight over redistributing Nile water resources. But-again no! There has been plenty of research carried out highlighting methods of irrigating wheat fields with minimal amounts of water, and even sea water.
Prime Minister Ahmed Nazif has recently ordered the Ministry of Agriculture to pit into action an urgent plan to fix the wheat crisis and draw up new strategies to reduce Egypt’s import of grain. He also ordered the devising of other future plans to encourage farmers to expand the planting of grain and fodder crops to solve both crisis of wheat and meat.
Well, it’s better late than never. In another context and openly with no shame, USAID has declared that the road is now paved for the US to re-assume its position as Egypt’s biggest source of wheat following the Russian ban.
This return to favour will certainly make a lot of dirty-handed beneficiaries happy-the wheat import monopolists and their long queue of middlemen that have been generating fortunes of profits for years before heading toward Russia two years ago.
The value of wheat imports is about US$3.6 billion per year. We can imagine the war between importers, exporters, logistic agents and corrupt officials over this nice juicy whole-grain pie. It’s simple to understand, once you remember that Egypt is the world’s biggest wheat importer- -the world biggest food dependant.
On the third of this month, Egyptian newspapers reported that Egypt has contracted the US to supply 225.000 tons of wheat, to be delivered between 11-20 October. Well done Egypt; You’ve passed over the real solution, again.
This article is originally published by Al Borsa