An upward trend in global food prices throws its shadow on local markets, Mona El-Fiqi reports On 27 April, the Central Agency for Public Mobilisation and Statistics (CAPMAS) issued its monthly report on average food prices in the local market. The report shows a clear increase in prices of some essential food products such as tomatoes which increased from LE2 per kilogramme in February to LE4.6 per kilogramme in March. The price of fish also went up by 7.8 per cent registering LE13.7 per kilogramme in March, up from LE12.7 in February. As for rice, one kilogramme of unpackaged rice, according to the report, rose to LE3.8 per kilogramme in March compared to LE3.5 in February. Cooking oil manufactured from cotton seed rose from LE8.7 per litre in February to LE8.9 per litre in March. Surprisingly, the price of beef was reduced from LE59.6 per kilogramme in February to LE55.6 in March. Shaaban Ahmed, owner of a supermarket in Nasr City, said that price increases include other products such as milk which rose from LE7 to LE7.5 per litre; a kilo of sugar is between LE5.25 to LE6.75 according to quality; corn oil reached LE14 per litre and a five-kilogramme bag of high quality rice went from LE26 to LE29. Ahmed added that prices of all kinds of cheese are expected to increase during the coming days following the increase in milk prices. "The reason behind the increase of price on some products such as rice is that some wholesalers and traders control the prices in the local market," Ahmed explained. In accordance with a continuous increase of food prices, the inflation rate in urban parts of Egypt was reported at 12.2 per cent in March 2011. Inflation rate refers to a general rise in prices measured against a standard level of purchasing power. The upward trend of prices is not only in local markets but it has roots in the global market. According to the Global Food Price Index produced by the United Nations Food and Agriculture Organisation (FAO), international food prices reached a historic peak of 237 points in February, well above the peak of 213.5 reached in 2008. In March, the FAO index dropped slightly to 230 points. Although the drop in March is welcomed, it remains premature to conclude that the general high trend in food prices has been reversed. However, Ashraf Kamal Abbas, professor of agricultural economics at the Agricultural Research Centre, explained that the upward trend is expected to continue and that the drop in March was a temporary slight dip due to good indicators of high global grains harvest this season, particularly wheat. "In general, food prices are expected to go up for many reasons," Abbas said. "On top of these reasons is the fact that the global food market is controlled by monopolies, similar to the oil and stock markets." Another reason, according to Abbas, is that the flexibility of demand in the food market is very limited so when any changes happen to global food supply, the effects on prices are severe. For example, last year when some countries were exposed to changes in weather, and floods hit their lands, the result was an unexpected increase in grain prices. A third reason relates to high demand since some countries, such as China and India, have increased their demand on food products due to a clear improvement in their income levels during the past few years. "High demand from these two big markets representing two billion individuals has a clear effect on global food demand," Abbas said. One more reason mentioned by Abbas is that some developed countries, such as the US and Brazil, have started to use the corn harvest in producing biofuel which has a notable negative impact on the global corn supply. The result was an increase of the global ethanol from 8.3 billion gallons in 2000 to 20.4 billion gallons in 2009, according to Abbas. "Effects of high food prices are being felt around the world, particularly in developing countries that depend on importing their food such as Egypt," Abbas said. "The problem in Egypt is complicated since the agricultural lands, as well as water resources, are under constraints." Abbas explained that total current agricultural lands in Egypt is eight million feddans, so an individual's share is a very small 0,11 feddan. This is due to the reduction in agricultural lands by using them in building houses, and negligence of land reclamation that would help increase the total area of agricultural lands. Abbas blamed the previous government as it gave priority to establishing touristic resorts rather than to reclaim agricultural lands. "It is time to change Egypt's plan to give priority to food security and encourage investments in the agricultural sector over industry, tourism or anything else," Abbas added. By giving more attention to agricultural research and investments, Egypt will be able to achieve 80 per cent of self-sufficiency in wheat, which can meet the production of subsidised bread, the most important item for the majority of people, according to Abbas. Raising the budget of agricultural research would also help raise land productivity to reach 85 per cent of total corn consumption. As for rice, Abbas explained that Egypt produces 130 per cent of its total consumption, and exporting rice is banned in order to provide rice at a reasonable price in the local market. However, traders store large quantities of rice creating a shortage in rice supply in the markets in order to raise the price. Abbas said the state should play an important role in controlling prices and protecting consumers. Optimistic about Egypt's agricultural future, last week Ayman Abu Hadid, minister of agriculture, announced that the wheat harvest this season is expected to reach five million tonnes compared to 3.5 million tonnes last year. Abu Hadid also predicted that during the coming two years, Egypt will achieve self-sufficiency in wheat needed to produce subsidised bread. This move will help reduce Egypt's total food imports' bill which is estimated at LE37 billion annually, according to World Bank figures. Egypt imports 40 per cent of its food leading to a high food imports' bill which represents a significant burden on the economy, according to the Global Economic Prospects 2010, a World Bank report. In an attempt to reduce the imports' high bill, Ahmed El-Sayed El-Naggar, head of the economic studies department at Al-Ahram Centre for Political and Strategic Studies, suggested that the government should, itself, import the country's needs, and do away with the mediators who are keen to increase their profits, thus raising the total cost price. Purchasing committees in all sectors should be under control and permanent inspection by different control authorities in order to guarantee that imports' prices are in accordance with the prices of the global markets, he said. El-Naggar gave an example of imported beef which is sold in Egypt at three times its international price, estimated at $1-2. Establishing food security is important during the coming period to hedge the risks of volatile food prices. El-Naggar said that giving priority to land reclamation, restructuring the agricultural policy which determines the crops needed to cultivate, and rationalising water consumption are a must. According to El-Naggar, Egypt can replace sugarcane with sugar beet in order to reduce the amounts of water needed for sugar cane.
