The daily metabolic demand for food is essential and relatively constant (roughly 15 calories per pound per capita). The price is primarily predicated on its supply.
Recently, Donald Trump offered the White House $100 million to construct a ballroom to entertain dignitaries. In a recent blog, I suggested it would be more prudent to spend that generous donation of food for the needy.
Trump is out, and food is in.
Recently, the supply of wheat has fluctuated widely as a result of external conditions, especially weather. Dry weather conditions in Russia and Western Europe, coupled with wet conditions in the U.S., have reduced the supply of wheat. The result has been a near doubling of wheat future prices to more than $8 per bushel on the Chicago Board of Trade.
Middle Eastern countries are highly dependent on wheat, which is found in bread, pasta, and couscous. The U.N. Food and Agriculture Organization (UNFAO), estimates annual per capital wheat consumption is greatest in Tunisia (478 pounds). The U.S. consumes 177 pounds, less than half that consumed by Algeria and Egypt.
Wheat comprises one-third of the Egyptian population’s diet. Nearly half of this crop is imported, which cost the government $2.6 billion last year, 6 percent of total government revenues. (According to the U.S. Congressional Budget office (CBO), the U.S. spends the same percentage of its revenues on the wars in Afghanistan and Iraq.) Next year Egypt expects to increase its wheat subsidies by $1.7 billion to $4.2 billion.
The resignation of President Mubarak in February and the associated political turmoil have significantly reduced tourism revenue, one-fifth of Egypt’s foreign exchange earnings.
The increased cost of wheat subsidies and the decreased tourism revenue have swelled the country’s fiscal deficit, placing economic pressures on an already difficult political situation.
The scenario could worsen as the population in this area expands. The World Bank estimates demand in 2030 for cereal imports could rise 55 percent above the 2000 level.
Julian Lampietti, who led a 2009 World Bank study of Arab food security, suggests, “This system is not very sustainable.”
The Middle East governments are turning toward western nations, such as the United States, European Investment Bank, and the European Bank for Reconstruction and Development, for financial assistance to encourage the development of market-oriented democracies. Egypt recently indicated that it may require $10 billion over the coming 13 months.
Political upheaval in the region includes the following countries: Iran, Tunisia, Egypt, Libya, Syria, Afghanistan, and Iraq. Thus far, the presidents of Egypt (Mubarak) and Tunisia (Zine al-Abidine Ben Ali) have been removed, and those of Libya (Gaddafi) and Syria (Assad) are in jeopardy.
The democratic experiment taking place in the Middle East today may be the beginning of a multigenerational endeavor. This positive secular change will be fraught with short-term cyclical difficulties. Intense engagement and monitoring will become paramount. Financial aid predicated on responsible results is essential.
Uncertainties escalated today, on the eve of Israeli Prime Minister Netanyahu’s U. S. visit, when President Obama proclaimed Israel should revert to its pre-1967 borders. This would require Israel to relinquish control of the West Bank, Gaza Strip, and the Golan Heights to form a Palestinian State. These territories were captured from Jordan, Egypt, and Syria, respectively, nearly 44 years ago during the 1967 six-day war.
Apparently, Netanyahu was prepared to relinquish a large portion of the West Bank, while preserving a presence along the Jordanian border and sovereignty over Jerusalem and the settlement areas. Not negotiable is a Palestinian State that currently endorses Hamas, an internationally recognized terrorist organization.
The confluence of geo-economics and geopolitics in the Middle East will have long-term national security implications for the United States. Food economics will be a powerful driver for policy development in the region.
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