Egypt, Wheat and Revolutions

Within a week of Morsi’s ouster, the ubiquitous gas lines and power shortages in Egypt ended.

This sudden turn of events started to take shape even before the United Arab Emirates, Saudi Arabia and Kuwait promised Egypt $12 billion in cash and fuel aid.

Evidently, the change of economic conditions in Egypt is due to certain business and other interests deliberately victimizing Egyptians by artificially throttling gas and power access.

These interests were keen to foster hostility against the Morsi regime — a clever, if mean act of subversion.

The Egyptian press drew quick attention to these “miraculous” events. The new military-installed regime knows the value of controlling the flow of information and misinformation.

As a result of these machinations, Egypt may have more fuel available than most people, including the Morsi government, had believed.

But its shortages of wheat, on the other hand, are very real — and they were kept secret by the recently deposed regime, for the simple reason that the country’s wheat stocks are far lower than they need to be.

The situation on this front was and is dire. About half of Egypt’s 85 million people are dependent of handouts of subsidized wheat. With its past domestic production, the country has only been able to sustain about half its needs. This has long made Egypt the world’s largest wheat importer.

The Morsi government had been producing a lot of propaganda over the last several months, predicting a record wheat harvest. But farmers denied this.

The evidence will soon be in, as the wheat harvest is coming to an end. So is the milling of the grain that began in May.

Egypt needs this harvest to be a good one, because it has just 500,000 metric tons of imported wheat left in storage. This is only sufficient for less than two months of consumption.

Egyptian consumers, as do the rest of consumers in the Middle East and North Africa (MENA), prefer to buy a soft variety of wheat to make unleavened bread. This is typically grown in Russia, the Ukraine and the surrounding region.

That is why the terrific drought that struck that entire region in 2010 had global ramifications. It was especially disastrous for Egypt. The drought caused Russia and other exporters to end wheat exports.

That not only, predictably, drove global wheat prices higher. Somewhat unexpected, it also made a major contribution to the blossoming of the Arab Spring in MENA.

As was the case centuries earlier with the French Revolution, the key cause for the Arab Spring was a rapidly deteriorating economic — and especially food — situation in the non-energy exporting nations in MENA.

True, there was also a desire to embrace democracy, but that wasn’t what really drove the masses. That is a key point missed by most in the West.

The reason why the Morsi regime kept its supplies of foreign wheat a deep secret was its dwindling supply of cash.

The wheat grown in Egypt is inferior to that grown in more northern climes, because of lower gluten content. The higher the amount of gluten is in wheat, the easier it is to make suitable unleavened bread.

Egypt tends to mix its domestic variety in with foreign wheat to extend supplies. The higher the contribution of the local wheat, the more bread — but of a lesser quality.

On Thursday, July 11th, the Rome based UN Food and Agriculture Organization (FAO) reported that Egypt’s dwindling cash reserves and its expanding population, combined with the ongoing civil unrest, raised “serious food security concerns.”

The FAO said even if Egypt has a bumper harvest this year, its demand for foreign wheat next year would remain the same.

Despite the $12 billion aid promise Egypt has received from its Gulf Arab neighbors, the country will need sizable chunks of aid on a monthly basis to start to repair its economy and the nation. The $12 billion in help it just received should be considered a lifeline — and not a cure.

Thanks to that aid, one can expect to see Egypt back in the international wheat markets in size in the very near future. It has no time to lose. After all, it typically takes 2 to 3 months from the time a tender is announced to when the wheat is delivered to the mills to be ground into flour.

As France’s absolute monarchs fatally learned too late, desperately hungry stomachs are hard to rule by anybody.

Russia as Egypt’s trump card?

The new regime in Egypt may have one trump card up its sleeve that the Morsi government did not. Russia has announced that it would hold discussions on possible humanitarian wheat deliveries to Egypt.

Apparently, Moscow is making geopolitical calculations to regain a positive relationship with the Sunni Arab states of the MENA region.

It had lost a lot of goodwill due to its support of the Shia Alawite regime in Syria.

This represents a complete about-face for Russia, which had refused to give the Islamist Muslim Brotherhood government of President Morsi wheat aid.

Russia has its own problems with radical Islamists at home. That is one of the reasons it has given such strong support to the Assad regime, which it fears could be replaced by Islamists.

In the past, Russia has been a major supplier of wheat to Egypt. Russia expects a good wheat harvest this year, possibly leaving a surplus of 20 million tons available for export.

If Russia were to offer Egypt free wheat as part of an aid package, or for sale on an extended payment plan, Egypt will definitely take it. The question for Egypt is whether Moscow has enough wheat lying around from last year’s crop to clean out from its silos and send to Egypt.

The tricky part for Russia will be balancing its ongoing support for Assad with its desire to renew its relationships with the Sunni Arabs.