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Egypt's wheat bill up, but bread riots unlikely

Cairo, September 8, 2010

Egypt, the world's biggest wheat importer, faces a higher bill for bread subsidies in the next year but has adequate financial resources and stocks to avoid any rerun of the violent protests of 2008.

Egypt raced to redo orders after drought-hit Russia halted grain exports in August, which sent wheat prices surging. Cairo had booked 540,000 tonnes of Russian wheat from July until then.

The speed at which it has refilled its wheat order book reflects a determination to avoid any shortages of subsidised bread on which many poor people in the country of 78 million depend. The government has repeatedly said supplies are secure.

Shortfalls two years ago, coupled with rising prices of other commodities, led to clashes between protesters and police.

In Egypt, securing basic staples is politically sensitive at any time, but analysts say the government is particularly wary now because it wants to head off any kind of unrest before parliamentary and presidential elections this year and next.

"I do not see the situation escalating to public unrest and riots similar to what happened in 2008, because international wheat prices are not rising to 2008 levels," said Magdy Sobhy at the Al Ahram Centre for Political and Strategic Studies.

Wheat prices surged in 2008 after several years in which global consumption of wheat had outstripped production.

But a Western industry expert based in Cairo said the latest price rise followed a couple of record global harvests, with supplies outpacing demand, so prices are unlikely to rise as high as that.

"Prices went a lot higher a couple of years ago, and I don't expect them to continue to climb so much this season or this marketing year because of the (global) stocks that have built up over the last two years," he said.

His comments echo those of a UN Food and Agriculture Organisation economist, who said the Russian export ban did not mean a repeat of the 2007/2008 food crisis.        

Egypt has paid about $280-$290 a tonne for wheat from France, Canada and the United States in August and September, while in June it paid around $165 a tonne for some Russian wheat. In early 2008, Egypt paid $450-$480 a tonne for some shipments.

As prices rise, the government is taking no chances and has bought stocks to last to January, a comfortable cushion.
 
Egypt consumes some 14 million tonnes of wheat a year, about half of that imported and most of it by state buyer the General Authority for Supply and Commodities (GASC), which bought some 5.5 million tonnes via international tenders in fiscal 2009/10.

The government will have a bigger bill than planned this financial year to pay for the small, flat subsidised loaves, so-called 'baladi' bread, which weigh roughly 100-125 grammes and each cost 5 piastres (less than 1 US cent).
   
Cairo has said it expects to spend an extra 2.5 billion to 4 billion pounds in 2010/11 to make up the shortfall after the Russian ban. But experts say Egypt can easily cover this. - Reuters




Tags: Egypt | wheat | Food | Bread | baladi |

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