2011-02-02 Food Crisis in Egypt

Analysts are warning of a food crisis in Egypt. Stratfor reports that, in the best-case scenario, the country has less than 40 days demand left.

• Year round irrigation channels that crisscross the Nile valley and delta "massively restrict the movements of trucks that could...distribute wheat. Egypt has hardwired into its infrastructure literally hundreds of thousands of potential supply disruptions." (Source: Stratfor)
• Egypt imports roughly 60 percent of its wheat needs. (Source: Stratfor) Egypt is the worlds largest importer of wheat. (Source: Slate)
• Egypt's one port, Alexandria handles 80 percent of Egypt’s incoming and outgoing cargo. "The ongoing protests in Egypt have encouraged most of the workers at the Alexandria port to skip work. The port is not officially closed, but current reports indicate that no workers are available to either load or unload cargo." (Source: Stratfor)
• Egypt claims to have grain reserves equal to 5.6 million metric tons (mmt), or enough grain to feed the country for 112 days. But according to analysts, this figure includes grain that has been purchased, but is not yet in the country. Combined with distribution challenges and loss of port, problems are compounded. (Source: Stratfor)
  
  In researching this, STRATFOR discovered that the Egyptian government has some 350,000 metric tons of storage capacity in port silos, 250,000 metric tons at inland silos, another 400,000 metric tons in open storage scattered around the country, and some 500,000 metric tons in various forms of private storage. Egypt is attempting to build out this storage and has so far constructed another 14 silo facilities with about 30,000 metric tons each. If we combine all of this capacity and assume they are all completely full, it only totals 1.9 mmt, or less than 40 days of demand. (Source: Stratfor)

Rising Food Costs Make Egypt Particularly Vulnerable

There has also been a huge run-up in food costs in recent months. Food prices in Egypt rose 17 per cent last year, according to Market Watch. A Credit Suisse survey reports that food inflation in the country has actually reached over 20 per cent, and is amongst the highest rates globally. Egyptians spend more on food each month than any other emerging nation, roughly 40 per cent. (Source: Slate)

The Food and Agriculture Organization of the United Nations reports that "the worldwide food price index is at an all-time high—surpassing its 2008 peak, when skyrocketing costs caused global rioting and pushed as many as 64 million people into poverty. The price of oils, sugar, and cereals have all recently hit new peaks—and those latter prices are especially troubling for Egypt, as the world's biggest importer of wheat." (Source: Slate)

Moreover the threat of instability has pushed the cost of food up even more in the Egyptian capital and elsewhere. (Source: Slate)

The Wall Street Journal reports that high food and commodity prices are partly a result of rising demand, but also reflect the vast amount of capital "pumped into markets in response to the global economic crisis, most notably the U.S. Federal Reserve, weakening the dollar "while at the same time driving up the price of dollar-denominated assets, including agricultural commodities such as corn and wheat which have doubled in seven months."

Egyptian Demographics and Autocracy

Egypt's population is 81 million at present, and growing at 2 per cent a year. "By 2025, its population could reach 104 million, and by 2050 it population could be close to 140 million, an increase of 70 percent." (Source: Huffington Post)

Market Watch reports that "In the absence of political freedom, no one is effectively fighting the government’s cultivation of a gigantic public sector, where hidden unemployment is glaring, average pay is hardly $20 a week, and overall payroll and benefits gobble some 40% of GDP."

Public education is substandard, so that the "consequent shortage of skilled workers has made industrialization even more difficult than it already is due to corruption." In fact one in three of the 700,000 university graduates can expect to find a job, while the bulk of U.S. aid goes to the military. "Egypt’s squandering of its limited resources on an immense army is even less economically justified than the Soviet Union’s was in its time." (Source: Market Watch)

Egyptian Food Crisis In the News:

Epoch Times: Bankers and Speculators Helped Create Egyptian Crisis

Scientific America: Are high food prices fueling revolution in Egypt?

NPR: Protests and the Price of Bread

WSJ: The Politics of Food Prices in Egypt