Egypt says has enough wheat to avert food riots

 Al-Arabiya

CAIRO (Reuters)

Egypt has secured the wheat quantities it needs to avoid shortages in subsidised bread and would not face a rerun of riots in 2008 over bread shortages, the trade minister said on Saturday.

Egypt, the Arab world's most populous state and the world's biggest wheat importer, pays hefty state subsidies to keep bread affordable in the country, where a fifth of the population lives on less than $1 a day, according to the United Nations.

In 2008, shortfalls in bread and rising commodity prices led to clashes between protesters and police. This year, Egypt has rushed to replace 540,000 tons of wheat contracts cancelled after Russia, its top wheat supplier, banned grain exports till year-end to address a massive drought.

Asked whether the government expected global wheat price hikes to stir public unrest in Egypt, Trade Minister Rachid Mohamed Rachid said: "No way, because the policy is very clear. First of all, we have secured all the quantities we need for our consumption."

"We have also secured the funds needed to increase the budget of our subsidy, which means at the end of the day, the Egyptian consumer and the Egyptian citizen will not feel the pain of the increase of prices globally," he added.

Egypt consumes around 14 million tons of wheat annually and relies on foreign supplies for about half of that amount. The trade ministry had said last month it expected changes in global wheat prices to impact the budget for fiscal year 2010-11 by between 2.5 and 4 billion Egyptian pounds ($701.1 million).

Egypt's core inflation rate rose unexpectedly in August to 8.2 percent from 7.08 percent in the year to July. The central bank said the rise was due to higher food prices associated with the Muslim Holy month of Ramadan which ended on Sept 9.

Domestic wheat production

Rachid said food subsidies would help contain the impact of rising food prices. "The fact that we are increasing our budgets for subsidies and the fact that we have more than 60 million people benefiting from our subsidized foods program, that in itself is the best measure we are taking," he said.

The agriculture ministry was also taking steps to maximize local wheat production, he said, but added Egypt would still need to import 6 million tons of wheat annually over the coming few years.

The agricultural ministry said last month it aimed to achieve 70 percent self-sufficiency in wheat by 2020 as it plants new strains with higher yields.

"What we are looking at is to ensure that whatever we are producing will continue to increase gradually but obviously we will continue to be a main importer of wheat globally within the next few years," Rachid said.

"We will continue to import in the range of 6 million tonnes of wheat every year," he said.

Since the start of the 2010/11 fiscal year on July 1, Egypt has bought 1.65 million tonnes of French, U.S., and Canadian wheat.

In the fiscal year that ended on June 30, Egypt's main state wheat buyer, the General Authority for Supply Commodities (GASC), purchased 5.53 million tonnes of U.S., French, Russian, German, Kazakh and Canadian wheat at international tenders.