Mideast Hunger

For years, food policy in the Middle East and North Africa was very simple: hydrocarbon exports paid for carbohydrate imports.

Rising agricultural commodities prices and a large population increase mean that the traditional policy is now untenable even if crude oil trades at about $120 a barrel, forcing countries in the region, including Saudi Arabia, to reconsider how it feeds its population.

“The region has woken up to the new food market reality,” says Abdolreza Abbassian, an expert at the Food and Agriculture Organisation in Rome.

The FAO estimates the region’s cereals import bill will hit $22.6bn this year (£11.4bn, €14.5bn), a 40 per cent increase on 2007. Since 2000, it has jumped almost 170 per cent. The rising bill is the latest signal of the looming food crisis hanging over the Middle East and north Africa, the region of the world most dependent on imports of food staples.

Jonathan Calland, of Tilda, India’s largest ex­porter of basmati rice, says: “Security of food supplies is for the first time since the 1970s back on the agenda in the Middle East.”

In the past few months, food riots have hit Egypt, the United Arab Emirates and Yemen as prices jumped almost 60 per cent in a year. A general strike, demanding action on rising prices, has been called in Lebanon on Wednesday. The discomfort over food price hikes is aggravated by a huge dependence on the international food market. Middle East and north African countries buy almost a quarter of all the cereals traded globally.

Abah Ofon, agricultural com­modities analyst at Stan­dard Chartered in Dubai, says: “The region is in a very precarious position.”

Two countries in the re­gion, Morocco and Jordan, have an even more acute problem because not only are they facing higher food prices rises, they are also net importers of fuel.

The dependence on im­ports is a consequence of the meagre agricultural supply – a result of paltry land and water resources – and booming demand – the upshot of fast rising populations and strong economic growth courtesy of high oil prices.

Despite the challenge, policymakers have taken a short-term view of the crisis and are pursuing quick-fix solutions, such as raising salaries, as in Egypt, to increase affordability or imposing price controls as adopted by the UAE. Nevertheless, four long-term trends are emerging: food subsidies, seen only a couple years ago in retreat, are on the rise, strategic stocks are been considered, the countries are trying to diversify their imports and there is renewed efforts for agriculture self-sufficiency.

Akhter Ahmed, at the International Food Policy Research Institute, a Washington-based think-tank, says that in the current environment of rising food prices, “politically it is very difficult to make any substantial change in the subsidies policy” even though, he argues, most result in wastage of public funds.

Alarmed by the potential for social unrest, Egypt will spend an estimated $2.4bn this year on bread subsidies, up from $820m last year.

Price controls, mostly eliminated during the 1990s’ economic liberalisation, are back. The UAE, for example, has imposed them through agreements with big supermarkets, such as the French retailer Carrefour, to maintain food costs at last year’s level.

Governments have also returned to the idea of building strategic food stocks, which were common in the 1980s. Sultan al-Mansouri, UAE economy minister, said strategic inventories are a “formula to control prices once they are out of control”. In Oman, the government has announced the purchase of 200,000 tonnes of rice, enough for two years.

Diplomats say the region’s policymakers have realised that relying entirely on the global market without a cushion is a flawed idea.

At the same time, governments are also looking to diversify imports through bilateral government-to-government trade agreements such as that recently reached between Libya and Ukraine. They are also trying to increase local agricultural production, particularly in north Africa, but also in Iran and Syria, but with limited success.

However, more long-term policies are necessary, particularly to battle the impact of climate change in the region, experts said. In a context where food price shocks are already a big concern, changes in temperature and precipitation will only add to the stress on agricultural resources.

Saudi Arabia’s plan to halt wheat production by 2016 because of concerns about the kingdom’s scarce water resources is the starkest sign of the troubles the region faces. “The big challenge for the region is water,” says Mr Abbassian.

Source - Financial Times