The Middle East celebrates the Eid holiday with food, which is the focus of many gatherings, but with Russia’s war against Ukraine driving up the prices of all manner of basic ingredients, this year’s gatherings will take a toll on family budgets and the Governments nervously eye economies.
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The Eid holiday marks the end of the fasting month of Ramadan for Muslims and is marked by family gatherings and large meals.
Prices for Russian wheat exported from the Black Sea rose 45.9% last year to $394/mt on April 29, according to Platts estimates from S&P Global Commodity Insights. Expensive wheat has led to rising prices for flour and bread.
Estimates for Argentinian FOB Up River Soybean Oil are up 53.61% over the past 12 months to $1,864.67/mt, while Sunflower Oil FOB Black Sea Ukraine is up 28.75%. High cooking oil prices mean more expensive fried chicken and cookies.
Some of the most vulnerable countries in the Middle East and North Africa are Oman, Lebanon, Egypt, Libya and Tunisia because they are more reliant on Russia and Ukraine for their food resources, according to Lee Bridgett, food retail and manufacturing analyst at S&P insights into global commodities.
Egypt gets 50% of its grain and 75% of its wheat from Russia and Ukraine, according to Bridgett. Lebanon has also become heavily dependent on wheat imports from Russia and Ukraine since the country’s economic crisis began in 2019 and the 2020 port blast destroyed some grain supplies, he noted.
To make matters worse, more and more countries are introducing export restrictions. Tunisia has banned fruit and vegetable exports, which could particularly hurt Libya, Tunisia’s largest export market, he said.
“The question is how long this war will go on, but as things stand now, food prices will certainly continue to rise for the rest of the year,” Bridgett said. “It just depends on how bad the situation gets. If it gets really bad and countries deal with their own crisis, I’m not sure how much help they can or will give each other.”
Farmers also have to deal with price shocks because natural gas is an important component of fertilizers.
The United Nations World Food Program called the food situation in the Middle East and North Africa just before Ramadan a “crisis” that has brought people’s resilience to a “stress point”. World food prices were at a record high back in February at the start of the Ukraine war, with vegetable oil prices rising as COVID-19 rules restricted workers’ ability to harvest crops.
High food prices in 2011 led to the Arab Spring protests that toppled some governments in the region, and preventing a repeat is close at heart for political leaders.
Wealthier nations – particularly oil and gas exporters who have benefited from the boom in energy prices and have allied with Russia in the OPEC+ coalition – have been stockpiling food. But by and large, the Middle East and North Africa remain vulnerable due to their heavy reliance on imports from countries as far away as Australia.
At the moment the global supply is sufficient, said Monika Tothova, an economist at the Food and Agriculture Organization of the United Nations. However, with supply chains becoming increasingly weak, Western sanctions preventing transactions with Russia and key exports from Ukraine falling, the outlook looks bleak.
Iraq has seen several protests over economic conditions in recent years, while Libya, Lebanon and Egypt have been similarly volatile. Sri Lanka is already experiencing unrest over food shortages, while Peru has seen similar protests over high fertilizer prices and other grievances, Tothova noted.
“The relatively cheap deliveries, which also take shipping costs into account, are gone,” Tothova said. “The Gulf has traditionally sourced most of its edible wheat from Australia, but Ukraine has supplied the feed grain, so animal protein prices will rise. But we don’t see any global bottlenecks at the moment.”
For years, Middle Eastern countries have made food security a national priority.
Saudi Arabia was an exporter of wheat in the 1990s, but high irrigation costs made imports more practical. Saudi Arabia is currently benefiting from both high oil prices and ample grain supplies, with wheat reserves sufficient to meet domestic demand for 11 months, according to US Department of Agriculture estimates. Libya, Oman, Lebanon and Iraq are at the low end of inventories.
Grain stocks are already declining worldwide, including in the Middle East. China has bought more animal feed, more agricultural raw materials have been used for biofuels, and there have been more production challenges like inclement weather and COVID-19 over the past two years, Bridgett said. “If for some reason we have a bad year for production in other countries, it could definitely become a problem for the Middle East.
Richer nations in the Middle East are taking steps to secure their own supplies, with Saudi Arabia recently lifting a ban on poultry imports from Thailand and making commitments to Ireland on beef imports, he said.
security of supply
Abu Dhabi’s investment company ADQ founded Silal, an agritech company, in 2020 to increase locally grown, farmed and manufactured food and manage strategic food reserves. In the same year, the company acquired a 50 percent interest in animal feed, grain, fresh produce and dairy specialist Al-Dhara Holding Co., and in 2021 acquired a 45 percent interest in commodities trader Louis Dreyfus Co. trading supply contract for the sale of agricultural commodities to the UAE.
“When you think about food security in the Gulf, the focus is always on sufficient availability so that there are enough supplies,” said the FAO’s Tothova.
Egypt, the region’s largest consumer of wheat, has continued to tender grain for future shipments from Russia, but the national food subsidy totaled $5.56 billion in fiscal year 2021-22 (July-June) and “is likely to be quite large.” Spending on the economy,” Tothova said.
Wealthy Gulf allies have provided billions of dollars in aid to Egypt to boost its economy. Most grain imports come from Russia, Ukraine and Romania.
However, with no end in sight to the Russo-Ukrainian war, food security will remain a precarious priority for Middle East governments.