Egypts food Prices

 Blog readers This post today is about food prices in Egypt and how it has contributed to the recent riots,I hope you find it very informative.

Egyptians are particularly vulnerable to increases in food prices because they spend an unusually high proportion of their income on food, according to a recent Credit Suisse survey. "Food inflation is a specific issue" in the country, the report notes, "having reached over 20 percent—amongst the highest rates globally." Egyptians spent more on food than respondents in any other emerging economy surveyed in the report—about 40 percent of their monthly income, versus about 17 percent for Brazilians and about 20 percent for Chinese and Saudi Arabians, The recent spike in wheat prices was not helpful for the millions of Egyptians who use it on a daily basis.

The Egyptian government does subsidize bread and other staples for poorer Egyptians, ameliorating the price increase somewhat. But most Egyptians purchase bread beyond what the subsidy allows. And the threat of instability has already pushed food costs higher in the Egyptian capital and elsewhere. Plus, rising food prices have a long history of causing social unrest in the country. In 1977, the state cut subsidies of basic staples, leading to deadly riots. In 2008, when food prices hit their first peak, Egyptians again took to the streets.

None of that comes as a surprise to social scientists. 

So what is causing the rise in food prices—and might prices abate, easing tensions in Egypt? Unfortunately, the answer is probably no. Commodity speculation by hedge funds and financial entities might be contributing to the global run-up in prices. But much of the recent increase can be explained by the simple laws of supply and demand. First, there are constraints on yields, caused by recent droughts in Russia, floods in Australia and Pakistan, and increased production of crops for ethanol and other biofuels, rather than food. At the same time, demand for food commodities has continued to climb in big and fast-growing countries like India and China. And rising oil prices—a key component of food costs, given the cost of shipping goods—aren't helping, either.

So why haven't Americans noticed an uptick in costs at the supermarket? Mostly because raw food costs are a smaller proportion of overall food costs for American consumers. When you buy a box of Wheaties, you're paying for packaging, advertising, and processing, as well as the wheat, making the price more insulated from inflation. In addition, U.S. food producers tend to trade in the futures markets to smooth costs—meaning ingredient costs get locked in months or even years in advance.

So, the global food crisis has remained mostly invisible in the United States. But it is all too visible in Egypt and other Northern African emerging economies. And the economic forces do not look like they will abate any time soon.So how has this affected people in Egypt.Well for a country where the average salary is 2 dollars a day it's a big deal.