Food crisis may worsen unrest

16 August 2012

Poor harvests in the US and Russia may drive food prices up in region

The worst US drought in decades and a poor Russian harvest are driving an increase in world grain prices that could intensify the volatile political situation across the Middle East and North Africa.

The US, which is the largest producer of maize, is expected to have its worst crop since 1995/96, hiking price forecasts by about 50 per cent, compared with earlier estimates. Russia, a vital supplier of Middle East wheat, faces a repeat of its drought-hit harvest in 2010, when Moscow put a moratorium on grain exports.

Outside Iran, the Gulf’s population is heavily dependent on cereal imports. Saudi production has dropped in the past 20 years, while agricultural output is negligible elsewhere in the GCC. North Africa has healthier domestic production, but is still a major grain importer. Egypt is the world’s largest importer of wheat, and Algeria is not far behind. Morocco is less dependent on overseas food supply, but this year’s wheat harvest has been hit by drought.

The prospect of rising food prices is troubling for the region. Previous supply shocks have often impacted politics. Former Egyptian president Anwar Sadat’s decision to reduce food subsidies when prices shot up in 1977 was met with riots in which more than 70 people died. When his successor Mubarak tried to reduce food subsidies in Egypt in 2008, it prompted a wave of strikes that resulted in demonstrations against the government.

Last year, rising food prices led to a mix of economic adversity and political discontent, which toppled governments in Egypt and Tunisia. It is a vulnerable time for the region. New regimes are still trying to establish their authority and restart economies halted by political instability. Established governments are keen to ensure their grip on power. Meanwhile, the global economy is in a seemingly endless slump.

The latest food price spike will not necessarily precipitate further political change in the region. But it can only add to the combustibility of an already febrile climate.

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications