Headlined in Sunday's New York Times, front page lead column "Short Of Money, Egypt Sees Crisis On Fuel and Food" goes into the grim details that Egypt is at the precipice of an acute food shortage, and that Egypt's desperately scarce wheat, needed to feed a growingly restive population with subsidized bread, is "stirring fears of an economic catastrophe." Negotiations with the World Bank and the IMF are foundering given the tax increases and subsidy cuts demanded by these international institutions of an Egyptian government already struggling to quell the ever mounting violent protests by its political rivals.
Egypt imports 75 percent of its wheat, making it the world's largest wheat importer. It is a commodity clearly essential to feeding its population. Given its current travails, which have decimated both tourism and investment, resulting in a grave economic downturn resulting in Egypt no longer having the foreign exchange (hard currency reserves have fallen from over $36 billion over two years ago to $13 billion today) to buy wheat in the open market without sellers assuming enormous credit risk.
Given the current construct of the wheat trade, that credit would have to be forthcoming from commodity trading houses such as Glencore, Cargill/Tradax, BungeAG, Louis Dreyfus, among others (please see "Egypt Seeks Deal On Wheat Imports As Stocks Run Low" F.T. 03.27.13). Ironically, while Egypt is at the precipice of its crisis, the Geneva-based Louis Dreyfus Commodities Group reported bonanza profits of over a $1 billion last year ("U.S. Drought a Bounty For Dreyfus" F.T. 03.28.13). Dreyfus and other commodity houses are primarily based in Switzerland, the world's leading commodities trading hub, where they are protected and contribute 3.5 percent to Switzerland's GDP ("Swiss Government Swings Behind Commodities Traders" F.T. 03.28.13).
The United States in turn is the world's leading wheat producer and the world's leading wheat exporter. Rather than using this vastly important resource to be marketed in the service of the nation, in a world where food is becoming the hypercritical commodity (The UN has predicted that with growing populations, the world's food supply will have to increase 70 percent by 2050, a target that, given changing diets, weather conditions, depletion of mined fertilizers such as phosphates, potash, mined nitrates and various farming impediments such as available water supply, population sprawl, will be extremely difficult to achieve) we are letting Swiss-based commodity traders set the ground rules of how wheat is bought and sold and all the while permitting the commodity exchanges, with their casino-inspired and government-protected investment banks, to set the prices to be paid. This without the slightest consideration of the nation's visceral and strategic interests, nor humanitarian concerns.
The Egyptian imbroglio is a clarion call for us to restudy exactly what our objectives are as well as our responsibilities as the leading exporter of grains (wheat, corn, second largest exporter of soybeans, and on) so basic to many throughout the world.
The Swiss commodity houses are business enterprises and highly successful ones at that. But that is clearly their priority -- 'business'. Perhaps it is long past time for the United States to create its own commodity selling entity -- perhaps as an arm of the Ex-Im bank, given its experience in financing offshore endeavors, under the policy guidance of the Department of State and the Agricultural Department. Along with this new focus and responsibility, it is also high time that the nation establishes a Strategic Grain Reserve much in keeping with the Strategic Petroleum Reserve.
Dealing with Egypt's current emergency would be feasible were we to have such a structure in place. Considerations beyond the immediate ability to pay and even price, could be held in abeyance. Perhaps it would be far more meaningful to this nation, that this young republic, in responding to one of the world's oldest civilizations in a gracious way, by being of help, but without diktat, in making our wheat available to the 16 million Egyptian families that are sustained by the Government's subsidized bread program. Certainly there will be those in the Muslin Brotherhood so filled with hatred toward us who will continue their rhetorical fulminations. But what of the near 50 percent or more of Egyptians who risked their lives to achieve a society free to express themselves, where women would be respected and all religions would be honored. Those are the Egyptians with whom we are allied and they are suffering enough under the current 'presidency.' Let us not punish them twice.
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