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AP: 'Cheap' Bread to Cost Billions in New Egypt

Author: Charles Hanley
March 28, 2011

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For over a half-century the Egyptian government has sold cut-rate wheat flour to bakeries for the production of bread. Many Egyptians rely on this subsidy, but in the face of a looming global food crisis, the program may cost billions of dollars for the new Cairo leadership.

In the gritty gusts of a sandstorm, men in turbans and women in veils stood uncomplaining for hours outside a ramshackle kiosk, lined up for their daily
loaves of "life."

Political change may be remaking Egypt, but "we trust in God that the bread's going to stay cheap," said Shadia Abdul Halim, 45, a mother of six patiently queued up to buy.

Bread has stayed cheap even as Egypt's other food prices leaped upward by 17 percent last year — cheap because the government pays for most of it.

Twenty of the flat, round pieces of local "eish" — "life" in Arabic, the word Egyptians use for the staple — cost just one Egyptian pound. That's the equivalent of 17 U.S. cents for more than 2 kilograms (more than 5 pounds) of bread.

But halfway around the world on this day, on a Chicago trading floor, the price of wheat edged up again, raising the pressure another notch on poorer states like Egypt that have made subsidized bread a fixture of Arab life, an increasingly unaffordable one.

The Middle East's bread subsidies are just one dilemma in a world facing a potential food crisis this year, like the troubles in 2008, when skyrocketing prices touched off riots in developing countries.

The U.N. global food price index hit a record high in February, surpassing even 2008's peak. The average price of wheat so far this year, $346 a ton, is more than double 2005's price. The reasons for the increases are various — growing demand, impact of higher oil prices, diversion of corn to ethanol. Drought and floods have cut into wheat production, possibly previewing what some analysts say will be growing global grain shortages.

The head of the U.N.'s World Food Program said hard-pressed governments are being pushed toward cutting food subsidies, at great risk.

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