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Sunday, 13 March 2022

Gov’t imposes ban on some food exports to conserve local supply

The Trade Ministry has banned the export of staple food commodities for three months as it looks to shore up supplies amid turmoil in the global food market caused by the conflict in Ukraine. Wheat, flour, oils and corn are all included in the export ban, along with lentils, pasta, and fava beans, the ministry announced in two separate decisions on Thursday and Saturday.

The decision comes amid spiraling global food price inflation and a global wheat supply crunch: Russia’s invasion of Ukraine is upending global food supplies and sending commodity prices soaring. The two countries provide around a third of the world’s wheat, and the conflict has sent global wheat prices surging by 48% over the past two week. In Egypt, the price of unsubsidized bread had already increased by up to 50% as of the start of last week. Egypt imports c. 80% of its wheat from Ukraine and Russia.

Securing our reserves is a gov’t priority: The Madbouly government is ready to spend an extra EGP 15 bn to cover wheat imports after promises that the government will try to absorb the costs “as much as possible” and relieve the inflationary impact on the public.

It’s not just wheat that’s a problem: The price of poultry feed — which is largely made of corn — has risen by more than 15% since the war began, head of the Poultry Division at the Federation of Egyptian Chambers of Commerce Abdel Aziz El Sayed told Ahram Online. Sayed said that there is “no reason why” domestic corn prices should have risen, since Egypt has a seven-month reserve on hand and shipments yet to arrive were locked in at prior prices. Egypt imports around 75% of its corn, with 30% of imports coming from Ukraine. The government is working to secure at least 3-6 months of reserves in all basic commodities, Prime Minister Moustafa Madbouly said last week.

What would the long-term consequences for Africa be if Ukrainian wheat supply dried up altogether? Researchers at Germany’s Kiel Institute for the World Economy entertained that less-than-fun hypothetical in a recent report that finds that Egypt’s wheat imports would permanently decrease by over 17% and raise prices up by more than 3%.

That’s effectively where we are now after Ukraine last week banned the export of wheat and other food staples to try and prevent a humanitarian crisis in the country.

Some respite: Oil posted its first weekly loss since Russia launched its invasion of Ukraine, with Brent crude falling 4.6% to settle above USD 112 a barrel, after briefly trading at almost USD 140 in a volatile rally earlier in the week, Bloomberg reports.

Is the wheat panic bubble bursting? Chicago wheat closed down 8.4% for the week on Friday after peaking at all time highs earlier in the week, Bloomberg reports. The drop came as traders wait and see if fresh demand for US exports will materialize on the back of the loss of Russian and Ukrainian supply.

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