The International Reporting (and Life) Adventures of Vivian Salama

Archive for the ‘Commodities’ Category

Egyptians Face Food Inflation by Day, Roaming Looters at Night

Posted by vmsalama on February 1, 2011

By Ola Galal and Vivian Salama

Click here for original link

Feb. 1 (Bloomberg) — Shattered glass fills the streets of Cairo as pedestrians are forced to avoid army tanks that guard banks and government buildings vulnerable to looters.

Banks are closed, making it difficult for Cairenes to get cash to buy staples. For those that have money, food prices are skyrocketing as consumers flood the few open stores.

Street demonstrations and night-time riots have left the Arab world’s biggest city largely paralyzed, as protester fill the city’s main square and looters and neighborhood groups armed with clubs take over at night.

“We have to protect our homes and children at night from the looters and in the morning we have to go to work,” said Saed Ragab, a café owner from Cairo’s Bab El Louq area. “The shops are at a standstill. It’s very difficult.”

Protesters are gathering in the city for an eighth day. Today’s march is aimed at drawing a million people onto the streets and forcing President Hosni Mubarak from power after 30 years. The military promised not to fire on marchers and said it recognized “the legitimacy of the people’s demands.”

At the same time, citizens are trying to continue their lives as best they can, faced with inflated prices since the protests started escalating on Jan. 28.

Pricier Bread

“Since Friday everything started to be expensive,” said Om Massad, a door lady handling deliveries in Bab el Louq, who said 5 piester bread is not available anymore and 50 piester bread has jumped in price to 60 piesters. One Egyptian pound is made up of 100 piesters, or about 17 U.S. cents. “Shops are taking advantage of these conditions,” she said.

Shelves at many of Cairo’s supermarkets are emptying quickly with businesses failing to keep up with demand as panicked shoppers seek to stockpile in the event of further unrest. Carrefour SA has closed all seven of its Egyptian stores after looting at an outlet in a Cairo suburb, a spokesman for the company said today.

Tourists are abandoning the country. TUI Travel Plc, Europe’s largest tour operator, said about 40 percent of planned departures from Germany to Egypt were changed or annulled yesterday after it let vacationers cancel their bookings or change destinations without paying a penalty.

‘Economic Instability’

“We are seeing a negative economic impact in the short term,” said Ahmed Galal, executive director of the Egyptian Center for Economic Studies in Cairo. “If the new government goes for the popular package — raising wages, increasing subsidies — it might actually appear as responding to the crowd but it will likely raise inflation and economic instability.”

Low wages and rising prices have sparked protests in Egypt since 2004. The economy in the country of 80 million people, the most populous in the Arab region, probably grew 6.2 percent in the last quarter of 2010, compared with 5.5 percent in the previous three months. The government says it needs growth of at least 7 percent to create enough jobs every year.

Economic growth was expected to accelerate to that level next year, the country’s former Finance Minister, Youssef Boutros Ghali, said on Dec. 13.

Headline inflation in urban areas, the rate that the central bank monitors, picked up to 10.3 percent in December from 10.2 percent the previous month. Core inflation, which excludes the prices of fruit and vegetables as well as regulated prices, accelerated to 9.65 percent as the costs of items such as rice, sugar and poultry increased.

Protecting Food

Many Egyptians are fearful that food and gas shortages could lead the country into a deeper crisis.

Security continues to be a concern with young men forming groups to protect their homes and families from the widespread looting. Packs of men patrol at night, roaming the streets with weapons ranging from meat cleavers to metal pipes.

“They stopped grocery delivery services and there are long lines,” said Eman Shafik, an IT manager from Cairo, who added that she hasn’t been able to find a working ATM machine to access her latest paycheck. “There is a shortage in cigarettes, juice, mint. Every day the prices increase more and more and people have no cash to buy the things they need.”


Posted in Arab, Commodities, Economy, Egypt, Employment, Inflation, Mubarak | Leave a Comment »

Beer and Barley

Posted by vmsalama on June 1, 2008

Just a quick post.  This is a fun website tracking the cost of a pint of beer in 200 countries — but it’s also an interesting way to track rising commodity prices around the world, given that one of the main ingredients in beer is barley. bottoms up!


For the Love of Beer

Posted in Beer, Commodities | Leave a Comment »

Precious metals continue to perform

Posted by vmsalama on May 27, 2008


by Vivian Salama

The National

DUBAI // Precious metals and “soft” commodities will continue to outperform this year as investors look to hedge against inflation through greater portfolio diversification, an industry expert has forecast.

Energy and grain should also perform well in the coming year, although not at last year’s levels, he suggests. 

“Since the commodities business has been very successful this year, more money is coming into the business,” said Victor Sperandeo, an author on commodities trading and the chief executive of Alpha Financial Technologies, as he addressed the 2008 Commodities Investment World conference.

“So what happens is as prices rise, more money comes into the business, because we [traders] start buying more.” Investors are celebrating this long awaited rally. Thanks to commodities, they are finally seeing significant gains in markets that in recent years have been dominated by the dotcom and housing sectors. Prices are up 20 per cent since the end of December, according to CRB, a leading industry index that tracks the prices of 19 commodities.

Experts suggest several factors have been contributing to the commodities rally, including traditionally higher spending during a US election year and the credit crunch, which as of late has served as a distraction to central bankers. The Beijing Olympics have also been stimulating higher commodity prices, said Mr Sperandeo.

“China is a huge buyer of commodities at this time,” he said, citing the country’s overwhelming consumption of everything from energy to industrial metals, cement and water. “This will continue until after the Olympics, then they may worry about the effects of inflation and other things.”

Gold and oil have continued to earn praises – from investors at least – for their performances in the past year. Crude oil sold at US$132.19 per barrel in New York on Friday, up 103 per cent from $64.97 a year earlier. Last Thursday, oil hit an all-time high of $135 per barrel on both sides of the Atlantic.

“I’m now saying that oil will hit $150 [this year],” said Mr Sperandeo. “It has a lot to do with supply and demand and what the US is doing to constantly restrict supply from coming on the market.”

While gold prices have slipped some 14 per cent since hitting a record high price of $1,030.80 an ounce on March 17, the precious metal is heading upwards and many investors believe it will inevitably surpass the $1,000 mark again this year. “Gold is just a reflection of inflation and world chaos,” said Mr Sperandeo. 

Mark Mathias, the chief executive of Dawnay Day Quantum, a UK-based investment firm, speculated on what he called the one fundamental difference between gold and oil.

“There are very big above-ground supplies of gold available in the [exchange-traded funds], exchange rate commodities and in central banks,” he said. “As an investor, the risk, if either of those parties starts selling, is there could be a big supply of gold in the market in a very short space of time.”

Far from being overly optimistic, investors warn that commodity rallies are cyclical, and what goes up must eventually come down. However, many believe that the market will continue to be bullish for as long as 10 years to come, particularly as capital shifts from the West to emerging markets in the Middle East and Asia.

The subsidising of infrastructure and economic development by emerging markets has led to a massive wave of global industrialisation. This massive scale of development will continue to fuel higher commodities prices as the demand for oil, as well as food, continues to grow.

“The money supply has increased 13 times from $800 billion [in 1971] to over $12 trillion two years ago,” said John Lee, the principal trader at Mau Capital Management. “Just from a money supply perspective, we still have a way to go to manage the amount of money that’s out there.”

However, Mr Mathias said that operational burdens on the commodity supply chain – whether they were shortages of delivery lorries, problems with mining equipment or poorly operated ports – plus a booming demand from countries in the Middle East and Asia, could be what was really driving prices up.

“Commodities require a shortage of supply, otherwise the price will not go up,” he said. “Every step of the way, the commodities supply chain is stretched, and there isn’t sufficient capacity to put through the degree of commodities being demanded.”


Posted in Commodities | Leave a Comment »

Rice importers call for 25% subsidy

Posted by vmsalama on May 11, 2008


by Vivian Salama

The National

Importers, anxious over the rising prices of basic food items, are calling for the Government to subsidise rice by at least 25 per cent.

Importers say their margins are being squeezed and, in some cases, they are making losses as they attempt to reconcile record commodity prices with a demand by retailers to keep costs down.

“Rice is the most basic food item so, of course, it should be subsidised,” said Riaz Hussein Bhojani, the general manager of Rashwell Company, a Dubai-based importer.

Global rice prices jumped from US$650 (Dh2,386) to US$1,000 per tonne in just the first three months of this year, hitting a 25-year high. India’s basmati rice export prices have also gone up from US$1,100 to US$1,200. In response, several retailers, including Baniyas Co-operative Society, Carrefour, the Union Co-operative Society and Lulu hypermarkets have agreed to implement price caps on dozens of basic commodities.

“International rice prices are going through the roof so, by fixing retail prices here at 2007 levels without subsidies, the Government is not taking into consideration what importers will have to face. And [they are] making room for a black market,” an Abu-Dhabi rice importer told Reuters. “I think that asking for only 25 per cent rice subsidy is a fair and modest demand.”

Last year the UAE imported about 750,000 tonnes of rice from countries including India, Pakistan, Thailand and Egypt, traders said. According to Mr Bhojani, one tonne of Pakistani basmati rice now costs his company Dh5,505 to import, up from Dh2,569 last year. A 39kg sack of Pakistani basmati rice costs him as much as Dh230.

“It is difficult for me to understand why the government is giving millions of dollars to other countries and not helping its own people,” Mr Bhojani added.

A senior official with the Emirates Society for Consumer Protection, a branch of the Ministry of Economy, believes that rice subsidies are not a solution to the crisis. 

“Salary subsidies would be a better economic option than rice subsidies,” he said, noting that the Government was not presently considering such a move. The Government is days from announcing a contingency plan to alleviate the burden of inflation on UAE residents, the official added. 

The Abu Dhabi Department for Planning and Economy has reported a 10.7 per cent jump in inflation last year, driven by higher rents, transport and food costs. According to the Emirates Consumer Protection Society, food inflation could rise as high as 40 per cent this year.

While several countries in the region have used subsidies as a way of addressing domestic poverty, high inflation has forced some to reconsider.

In Syria, for example, basic items such as sugar, tea, bread and water are subsidised at a price the country’s poorer residents can afford. However, with the influx of more than 1.5 million Iraqis to Syria since 2003, the country’s lawmakers have considered dropping subsidies as the economic burden becomes increasingly hard to absorb. Food and energy subsidies in the country are predicted to cost US$7 billion this year – almost 20 percent of the country’s gross domestic product, according to government estimates.

Burhan Turkmani, the general manager of Al Rabiah Trading, a Dubai food importer, said he was not optimistic that subsidies would be applied here, despite believing that a 25 per cent subsidy was a reasonable demand. “It is a rich country and the economy is strong, so I believe the Government can certainly absorb such a cost. But I don’t think it will happen because of the high number of foreigners living here,” he said. “I think a government’s first priority is to help its own citizens, so maybe rice subsidies are not on the top of the list.”

Among other measures, the Government is exploring the option of purchasing farms in Pakistan in an effort to boost strategic food reserves. Last month the Ministry of Economy urged retailers to start stockpiling basic food items to prevent shortages caused by export bans in countries such India, Egypt and Brazil. The Government has since recommended that, as a cost-cutting measure, retailers consider eliminating the middlemen when importing commodities.

Posted in Commodities, Rice, United Arab Emirates | 2 Comments »

UAE may buy Pakistan farms

Posted by vmsalama on May 6, 2008


by Sarmad Khan and Vivian Salama

The National

ABU DHABI // Inflation and the spectre of long-term food shortages have prompted the Government to consider a new strategic investment – the purchase of large-scale farms in Pakistan and other countries.

The aim is to protect the country from the turmoil of soaring wheat and rice prices and export bans by producing countries that could lead to food shortages.

The Government is holding exploratory talks with Pakistan on the proposal, according to a senior Pakistan government official and the Emirates Society of Consumer Protection, a division of the Economy Ministry.

The Government was looking to acquire large land holdings and import food at 20 to 25 per cent less cost, a senior Pakistani government official said. 

There are six parties in the chain between the farmer and the time the product reaches retailers including the farmer, broker, exporter, importer here, wholesaler and retailer. 

According to a Pakistani official each party retains a 5 per cent margin on each transaction, and by eliminating several steps the government can bring the cost of food down by 20 to 25 cent, according to a senior Pakistani government official.

“The talks have been going on between Pakistan’s government and the UAE’s Ministry of Economy for some four months, however no concrete decision is made yet,” he said. The ministry was seeking support and guarantees from Pakistani counterparts before getting into large-scale corporate farming, he added.

Rising inflation is one of the driving forces behind the Economy Ministry’s decision to consider alternative food sources that would secure supplies for the country while cutting costs.

“We believe that, if we get products directly from the farms, it will encourage market competition,” an official at the Emirates Society of Consumer Protection said, adding that the government was studying similar options in other countries.

Pakistani officials say their government will facilitate negotiations between farmers and UAE representatives but it is not involved in growing food and cannot help the UAE set up government-supported farms.

Last week Pakistan announced the introduction of tax exemptions, duty free import of equipment and 100 per cent land ownership in specialised free zones in its agriculture, livestock and dairy sectors to lure potential investors.

It is expected to announce more concessions to entice investments.

“Agricultural free zones will be set up within the next four to five months, which will open up doors for the nations to own sources of food supply,” the Pakistani official said. “It is a good opportunity, especially for GCC countries which are dependent on food imports.”

GCC countries rely heavily on imported food and the UAE imports nearly 85 per cent of its supplies for an estimated Dh11 billion (US$3bn) annually.

The GCC is the largest importer of food from Pakistan, according to Pakistani officials. A number of GCC-based companies have already turned to Pakistan for alternative resources. Qatar Livestock Company is to invest $1bn in corporate farms in Pakistan, according to Huma Fakhar, an adviser to the Bahraini government. Some Saudi Arabian groups, particularly Al Rabie Group, a dairy company, have expressed interest in buying land in Pakistan.

“There is a global crisis right now,” said Miss Fakhar. “If you do not prepare these reserves now, then three to four years down the line it will turn extremely critical.”

Several UAE-based retailers including Baniyas Co-operative Society, Carrefour, Union Co-operative Society and Lulu hypermarkets have agreed to help the government to curtail inflation by putting price caps on basic commodities.

Last week the Economy Ministry urged retailers to start stockpiling basic food items to prevent shortages resulting from export bans by countries like India, Egypt and Brazil.

The UAE government has also urged retailers to consider eliminating middlemen when importing commodities to cut costs. While executives like José Luis Durán, the chief executive of Carrefour, encourages supermarkets to work directly with farms, others are concerned that this carries a hidden catch.

“If you want to make money as a farmer, go to a place where the farmers are making money, not a place where the land is cheap,” said Jannie Holtzhausen, chief executive of Spinneys in Dubai. “What has now suddenly changed in the world that the economic model drives governments to become farmers?”

Concerned about what the initiative means to their businesses, local importers are speaking out against it.

“Eliminating traders from this process would be a mistake,” said Burhan Turkmani, the general manager of Dubai-based Al Rabiah Trading Company.

“Farmers are not exporters and governments are not importers,” added Riaz Hussein Bhojani, the general manager of Rashwell Company, another trading company

Posted in Commodities, Inflation, Pakistan, United Arab Emirates, Zahi Hawass | 3 Comments »