The Oil Drum has a really good overview of Egypt’s general predicament when it comes to resources (oil, natural gas, food, and the like).
As food inflation is such a hot-button issue right now, here’s the part on food. The gist. A rapidly growing population has not only caused demand to grow, it’s also reduce the amount of land availability for growing food.
Egypt’s population has been growing rapidly (estimated at 2% per year by the CIA World Fact Book – about 3.0 children per woman), but the population is concentrated in a narrow strip along the Nile River. (Graph from Population Databrowser.)
As population grows, the amount of land needed for housing and businesses rises, and the amount of land for agriculture falls. So Egypt can produce less of its own food, as time goes on.
Egypt is reported to be the world’s largest importer of wheat. In 2010, the oil minister stated that Egypt imports 40% of its food, and 60% of its wheat. The problem this year is that world wheat production is down (at least in part due to weather problems in Russia) so world exports are down:
Figure 4. World wheat production and world wheat exports from USDA
A longer term problem, though, is that world wheat production has not been growing to keep up with growing world population. Part of this lack of growth may be competition from biofuels. Part of the lack of growth also relates to the fact that the “green revolution” improvements (adding irrigation and fertiliser) are mostly behind us. While irrigation and fertiliser greatly improved production at the time of the change, gains in production since 1990 have been much smaller.
The cost of imported food, particularly wheat, has risen, partly because of the relatively smaller harvest, and partly because the cost of production and transport is rising because of rising oil prices. Figure 5 shows the close relationship food prices and oil prices. The Food Price Index used in this graph is the FAO’s Food Price Index related to food for export; Brent oil prices are spot prices from the EIA.
With oil prices higher now (because world production is close to flat, and as countries come out of recession, they want more), food prices of all types are higher as well. Oil is used directly in the production of grain and indirectly in storage and transit, so its cost becomes important.
The higher food prices contribute to the overall inflation problem that Egypt already had. In 2010, the CIA Factbook estimated the inflation rate to be 12.8%. Since wages don’t always rise to match inflation rates, inflationary pressures have no doubt put more pressure on the government to increase subsidies, at a time it cannot really afford to do so.
By the way, in case you haven’t noticed, wheat prices are currently above where they were last summer during the Russian wildfire crisis.
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