Political turmoil in Egypt has caused disruptions in the world wheat market because Egypt is the world’s largest importer of wheat and flour. The North Africa and Middle East regions are large importer of agricultural commodities and food products and will remain growth markets with growing populations, rising incomes and limited potential to increase domestic production. Political leaders outside the regions need to be as concerned about food shipments into the regions as they are about petroleum shipments out of the regions.

 

According to estimates by the Foreign Agricultural Service of USDA, North Africa is the leading wheat and flour importing region for the current 2010/11 marketing year at 22.3 million metric tons (MMT), 18.2 percent of world wheat trade of 122.2 MMT. The Middle East region is the second largest market at 17.1 MMT, 14.0 of world wheat trade. Imports are expected to be 55.5 percent of wheat consumption in North Africa and 31.7 percent in the Middle East. North African imports have been stable in recent years at 21-23 MMT per year, while Middle East imports have been more variable with a high of 28.5 MMT and a low of 12.0 MMT. Egypt is projected to import 9.8 MMT, followed by Algeria at 5.3 MMT, Morocco at 3.6 MMT, Iraq at 3.4 MMT, Turkey at 2.5 MMT and Yemen at 2.3 MMT.

North Africa is a minor importer of rice, while the Middle East is the second largest importing region at 5.8 MMT, 20.3 percent of world rice trade of 28.6 MMT. Imports are 72.2 percent of consumption, and rice imports are stable year to year. Saudi Arabia is the largest rice importer in the region at 1.3 MMT this year, 4.6 percent of world trade, followed by Iran and Iraq at 1.2 MMT each. The Middle East is the second largest coarse grains importing region at 20.0 MMT, 17.5 percent of world trade of 114.4 MMT, with North Africa fourth at 11.7 MMT, 10.2 percent of world trade. Imports are 50.8 percent of consumption for the Middle East and 45.7 percent for North Africa. Saudi Arabia is the largest coarse grains importer in the two regions at 8.9 MMT, followed by Egypt at 5.4 MMT and Iran at 3.6 MMT.

The two regions are not only major importers of grains, imports account for one-fourth to three fourths of consumption. Timeliness of imports is important to keep the consumer pipeline full, and the temporary shutdown of Egyptian ports caused concerns. Any significant shortfall in domestic production leads to more imports.

The situation is similar for oilseed crops. The Middle East region will produce about 2.7 MMT of oilseed crops this year, mostly cottonseed and sunflower seed, and import 5.1 MMT of oilseed meals and 3.6 MMT of vegetable oils. Summary information is less complete for North Africa, but imports of soybeans and products for this year are estimated at 2.2 MMT of soybeans, 2.1 MMT of soybean meal and 1.1 MMT of soybean oil. Both regions rely on import for about 40 percent of beef and young chicken meat consumption.
Population growth rates in the two regions are generally above the world average of 1.13 percent for 2009, with the two biggest countries, Egypt and Iran, respectively growing at 2.0 percent and 1.25 percent. The International Monetary Fund believes economic growth is picking up across the region with increasing exports, including the non-oil exporting countries, but concludes that high unemployment will be a continuing longer-term problem. That has political implications for government stability, but government food assistance programs will likely remain substantial and support demand for imported grains and vegetable oils. For example, Egypt provides subsidized bread for 80% of the population at a cost of $4 billion per year, Algeria imported 2 MMT of wheat in January to increase internal stocks, and Jordan announced $125 million of additional subsidies.

High food prices in 2007 and 2008 led to some governments, companies and individuals from Middle East and North African countries pursuing land arrangements in Sub-Saharan Africa to buy or lease large tracks to produce food to ship back to their respective countries. Countries mentioned in media reports included Saudi Arabia, United Arab Emirates, Qatar, Kuwait, Bahrain, Libya and Egypt. Few details about these efforts have been released, but the current period of high agricultural commodity prices will likely re-stimulate those activities.

In the first eleven months of 2010 U.S. agricultural sales to the North Africa and Middle East regions were $8.49 billion, led by soybeans, meal and oil at $1.64 billion, coarse grains at $1.25 billion and wheat at $0.85 billion. Other major items included tree nuts at $0.53 billion, rice at $0.47 billion and dairy products at $0.30 billion. Sales in the high price year of 2008 were $10.0 billion, before falling to $7.2 billion in 2009. These totals are much smaller than the NAFTA partners Canada and Mexico at $34.0 billion, or Asia at $55.0 billion.

Regardless of how countries in the North African and Middle East regions resolve internal political decision making, the two regions are permanent markets for a wide range of agricultural products. Their dependence on imports puts them in a similar class with Japan and South Korea needing to import products twelve months a year regardless of drought in the Black Sea region or rains in Australia. In times of political uncertainty there is even more need for prompt delivery of products. The goal of trade is to feed people, not to get entangled in political issues.

Trade will have an increasingly important role in food security. The WTO should take this up as part of the Doha Round of negotiations. Exporting countries should consider regular customers in other countries, like North Africa and the Middle East, as important as ones within their borders. Importing countries also have a responsibility to use market-based institutions to anticipate needed trade flows and arrange shipping and storage. Those countries should also share information on stocks policies, inventory levels and anticipated import requirements and not use import tariffs to support local market prices when internal supplies are large.

The weather problems in the Black Sea region this summer and now the political unsettled conditions in North Africa and the Middle East have given a good overview of trade policy problems in an era of increasing agricultural trade.