Lebanon is asking US help to import wheat to move away from the Ukrainian market

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The war in Ukraine has forced the Lebanese state to replace private importers in buying wheat for the first time in three decades and to move away from the Ukrainian and Russian markets.

Amin Salam, Lebanon’s economy minister, said The National On Tuesday he asked the US and other international donors to help secure an emergency reserve as wheat stocks remain low. The country’s only silos at the port of Beirut were destroyed in a devastating explosion in August 2020.

The goal is to buy a month of the country’s wheat, or 50,000 tons, and then progressively more. “We’re getting them at the lowest market price,” said Mr Salam, who will discuss the details of the plan with the Treasury in the coming days.

The wheat will be stored in the countries of sale and shipped to Lebanon when storage capacity allows, he said. The move is a direct response to Russia’s invasion of Ukraine, but also part of a broader strategy to maintain reserves, the minister said.

Before the blast, Lebanon’s wheat reserves were equivalent to three or four months’ consumption. Since the explosion, depleted stocks can hardly last more than a month. Wheat is currently stored in the Tripoli port and in buildings owned by the country’s millers.

Lebanon’s food security must be a red line

Ali Ibrahim, Vice President of the Association of Lebanese Bakers

With wheat prices soaring due to the Ukraine-Russia conflict, there are fears that Lebanon’s cash-strapped central bank will not be able to continue subsidizing bread.

This could spark social unrest in a country where nearly three-quarters of the population has been pushed into poverty since 2019. The financial collapse in Lebanon has tumbled the local currency and pushed up inflation.

“The central bank is not in a position to pay higher prices,” Mr Salam said. “They’re now subsidizing wheat at $390 or $400 a tonne, but if international prices go up to $500 a tonne, then the central bank’s costs go up because they’re subsidizing wheat 100 percent.”

This means that the Lebanese central bank spends around $20 million a month at current prices.

Lebanon is highly dependent on wheat imports from Ukraine and Russia to produce its widespread traditional Arabic bread. Customs figures show that in 2020, Lebanon imported 81 percent of its wheat from Ukraine and 15 percent from Russia.

Mr Salam said while Lebanon is still considering buying from Russia, he has spoken to Romania and the US and he expects to discuss possible deals with India, France and Canada in the coming days. Ukraine is no longer an option.

“The further we go, the more expensive shipping becomes,” he said. “We must act quickly. Every day prices can increase by $20 or $30 [per tonne] dependent on the escalation of the war between Russia and Ukraine.”

The Lebanese state delegated the purchase of wheat to the private sector at the end of the 1975-1990 civil war. Buying wheat directly is “outside the norm,” Salam said. “But the Department of Economy and Trade is legally allowed to do so, especially when we are faced with such an emergency.”

He said he believed government purchases of wheat would remain in place over the next year.

The economy ministry’s decision shows that it is “reconsidering its duty on strategic food,” said Riad Saade, director of the Lebanese Center for Agricultural Research and Studies.

Lebanon established a government program in the late 1950s dedicated to the research, production and import of crops, including wheat, after independence. However, this system was dismantled during Lebanon’s post-war reconstruction in the early 1990s.

“The Commerce Department, which used to control operations, became the supervisor and paved the way for wheat, grain and grain contractors to do the work,” said Mr. Saade.

Lebanon’s post-war system is under intense scrutiny by the IMF, which is calling for sweeping anti-corruption reforms before considering a bailout.

Sales of bread have increased over the past two years because subsidies have kept it relatively cheap compared to other commodities, said Ali Ibrahim, vice-president of the Association of Lebanese Bakers.

The cost of a pack of bread, set by the Ministry of Economy, is currently US$0.40 at market price, or 8,000 Lebanese pounds. Before the 2019 crisis, it cost 1,500 Lebanese pounds.

“Lebanon’s food security must be a red line. They must start importing the wheat today, before tomorrow,” said Mr. Ibrahim.

Mr Salam said he hoped to lower the price of bread should a foreign country intervene to meet Lebanon’s wheat needs. “We want prices to go down or stay the same. If they rise, it will be a disaster,” he said.

Updated March 01, 2022 2:54 p.m

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