Why is it that some people are predicting the end of Egypt as the
world has known it for seven thousand years but that we, who know better, do
not worry one iota? Well, the reason has to do with the story of food, wheat,
grain, foreign currency reserves and a whole lot of mythology.
Those who have predicted the end of Egypt believed
in a confused mythology whereas those of us who knew better did not. And this
is because we were aware of something that had escaped the others. What follows
is an explanation that should clear up the confusion to those who are
interested in the subject.
A well fed person consumes about 6 pounds of food a day made
of grains, vegetables, fruits, nuts, dairies, meat or seafood; and this comes
to about one metric ton a year. Different cultures consume different
proportions of that variety depending on what the environment in which they
live supplies to them. The Egyptian diet is a varied one but tilts heavily
toward the grains – especially wheat which occupies a special place in the
culture going back to ancient times.
About 80 million Egyptians live in Egypt and a few
million more live and work outside the country. Those in Egypt consume a
varied diet of about a ton of food a year per person. Approximately one pound a
day is made from wheat that is consumed in the form of bread, pasta, cakes and
what have you. When you do the math, you come up with the figure of 13 million
metric tons of wheat a year as being the total consumption of wheat in the
country. In fact, this is what the mills produce in the form of flour, and what
they deliver to the bakeries.
Depending on the weather, Egypt is expected to produce
somewhere between 9.5 and 10.5 million tons of wheat this year. From these, the
government will purchase perhaps as much as 4.5 million tons to produce the
bread it sells at subsidized prices in the poor neighborhoods. The rest will be
sold by the farmers to the private sector.
In fact, the government produces 6 million tons of bread a
year which means it will need to import wheat from abroad as well. Since the
local production may be around 10 million tons, and the country consumes 13
million, the government will want to import 3 million tons to produce the
bread, and keep some in storage. It may even buy a little more this year to
store in silos it started constructing to replace the old warehouses.
When it comes to wheat and Egypt , the story of trading in the
commodity becomes very complicated. In fact, there are several strands to that
story. First, there is the fact that you can never handle grain without losing
some of it as you transport it; and you can never process it without wasting
some of it. The estimate of the loss in Egypt as everywhere else varies
between 8 percent and 15 percent depending on many factors.
Second, bread is never made with 100 percent wheat. The
proportion may vary from 70 percent to 85 percent in wheat, the rest being
corn. Thus, to produce 13 million tons of flour, the mills may have to start
with as little as 11 million tons of wheat if the losses are minimal; or they
may have to start with as much as 14 million tons if the percentage of wheat is
high.
Third, more wheat is used in Egypt than is milled into flour. In
fact, a few delicious dishes are made with whole grain; and the cook books show
how to prepare them. Fourth, not all the wheat is consumed by humans. Even
though corn is usually fed to poultry and to cattle, some farmers mix it with a
certain amount of wheat. Fifth, Egypt
is a big exporter of processed food, some of which is made from wheat such as
pasta, for example, which is a huge industry in the country.
For these reasons, you will find that several million tons
of wheat are also imported into Egypt
by the private sector and used by it. The estimates vary from between 3 million
tons to double that amount, even triple. But nobody can be certain because
there is also the fact that the system of subsidies in Egypt is a
headache all by itself; and this adds to the difficulty of dissecting the story
of wheat.
To make a long story short, some crooked merchants import
wheat, declare that it was planted locally, get paid a subsidy for that; pocket
the money then turn around and reexport the wheat at the price they paid to
import it.
Aware of all this, those of us who do not worry about Egypt
disappearing, understand two important points that have escaped the others.
First, the amount of wheat produced locally is at least 50 percent more than
what is needed to produce the subsidized bread. Whereas 10 million tons are
produced, only 6 million are used to produce the bread. Thus, if worse comes to
worse, the government will always find enough wheat to produce the required
quantity of subsidized bread.
Second, there will always be enough foreign currency in the
country to import the 3 or 4 million tons of wheat needed to fill the gap
between the amount that is produced locally and the amount that is consumed in
total. It will cost a billion dollars to import as much; a trivial sum compared
to the 30 or 40 billion dollars in the hands of the private sector.
Yes, the central bank holds only a third of that amount at
this time, but it has several options by which it can acquire the amount it
needs should it need any.
Besides, Egypt
gets in more than a billion dollars a week in foreign currency but needs only a
billion a year to buy the wheat that would fill the gap. This is like someone
making a thousand dollars a week, and his friend worrying he may not have
enough to buy a 4 dollar Cappuccino every weekday.
There is nothing to worry about, my friend, but
misinformation and confusion where there should be none.