We’re spending a whole lot more on wheat — and events in Ukraine could bump up spending even more
Spiraling wheat prices land us with an EGP 12 bn check: The rise in global wheat prices will cost us an additional EGP 12 bn this fiscal year, Finance Minister Mohamed Maait yesterday told Bloomberg Asharq. State grain buyer GASC had been allocated some EGP 87 bn in this fiscal year’s state budget, according to official figures (pdf).
Commodities crunch hits home: As the world’s biggest importer of wheat, we’re significantly exposed to price hikes that saw the grain trade in 2021 at its highest levels in more than a decade amid the global commodities squeeze, with Egyptian tenders delivering the highest prices in at least five years.
Making matters worse: the threat of war in Ukraine. Conflict in the Donbas could have an impact on Egypt and other wheat dependent countries in MENA, food analyst Alex Smith writes in Foreign Policy. Egypt is the largest consumer of Ukrainian wheat, last year purchasing the equivalent of around 14% of its total wheat consumption from the eastern European country. Most Ukrainian wheat is grown in the east of the country, which also happens to be the area most likely to be hit by conflict, setting the stage for huge falls in production and supply shortfalls internationally should tensions spill over.
Wait, it gets better: We’re also bracing for the possibility of pricier wheat as Russia mulls higher export tariffs on the grain.
Bread prices could rise for the first time in decades: The reality of price pressure was spelled out last summer when President Abdel Fattah El Sisi signaled that the government could move to hike bread prices. Six months later and the Supply Ministry is now working on several scenarios that would see the government taper bread subsidies and limit the impact of rising international prices on the state budget. History suggests the state will move carefully on bread prices after a hike in the late 1970s provoked a furious response.
Hedging an option: The Finance Ministry was also mulling hedging against rising grain prices last year, but has not announced whether it has entered into any contracts.