Lebanon fears price hikes after Russian grain deal collapse
Russia pulled out of a deal brokered by the U.N. and Turkey to allow Ukraine's grain to flow during a global food crisis. It helped stabilize food prices that soared last year after Russia invaded Ukraine — two countries that are major suppliers of wheat, barley, sunflower oil and other food to developing nations.
Lebanon, Egypt -- the world's largest wheat importer, and other lower-income Middle Eastern countries like Pakistan worry about what comes next.
Struggling with economic woes that have driven more people into poverty, they fear rising food prices could create even more pain for households, businesses and government bottom lines.
Many have diversified their sources of wheat, the main ingredient for flatbread that is a staple of diets in many Mideast countries, and don't expect shortages.
It "is an unnecessary shock for the 345 million acutely food insecure people around the world," said Abeer Etefa, a spokeswoman for the U.N.'s World Food Program.
Russia also has launched attacks on Ukrainian ports and agricultural infrastructure following the collapse of the accord, leading global wheat prices to zigzag.
Despite the volatility, the costs are below what they were before Russia invaded Ukraine, and there is enough production to meet worldwide demand, said Joseph Glauber, senior research fellow at the International Food Policy Research Institute.
But for low-income countries like Lebanon or war-torn Yemen that are big wheat importers, finding suppliers that are farther away will add costs, he said. Plus, their currencies have weakened against the U.S. dollar, which is used to buy grain on world markets.
"It's one reason why you see food price inflation lingering in a lot of countries — because even though world prices I mentioned are at prewar levels, that's in dollars. And if you put it in, say, the Egyptian pound, you'll see that Egypt wheat prices are actually up," said Glauber, former chief economist at the U.S. Department of Agriculture. "They're certainly as high as they were during the high points of 2022," he said.
That packs pressure on governments, which will have to pay more to keep subsidizing bread at the same level and avoid raising costs for households, he said. With many also seeing their foreign currency reserves dwindle, it could put countries in the Middle East and elsewhere in a more precarious financial situation.
Local wheat production is expected to remain at 9.8 million tons, while consumption increases by 2% to 20.5 million tons in 2023-2024, according to a USDA report from April.
In Lebanon, the grain deal's collapse could be an additional hurdle as the tiny Mediterranean country relies on Ukraine for at least 90% of its wheat, flour millers say.
The agreement helped resolve supply shortages that shocked the market during the onset of the war, causing large breadlines and rationing. Caretaker Economy Minister Amin Salam said any negative impact on wheat prices following the deal's collapse will "certainly" affect prices at home.
The country of some 6 million is in the throes of an economic crisis that has impoverished three-quarters of its population. Its main wheat storage silos were destroyed in the Beirut port blast in 2020, so its grain reserves lie entirely in private mills' storage.
"We currently have two months' worth of wheat reserves, and we have one month's worth on the way," said Wael Shabarek, owner of Shahba Mills. "While I expect some price increase, it won't be the same as before — as the beginning of the war — when it was a total shock for us."
However, Lebanon's economy keeps shrinking, its currency has lost 90% of its value since 2019 and the World Food Program says local food prices are among the highest in the world.
