Elias Fares, who runs a bakery in a Beirut neighbourhood, is worried. He has secured enough flour to keep his shelves stocked for the next few weeks. But he is concerned the collapse of the Black Sea grain deal after Russia’s withdrawal from the agreement will worsen the country’s food security.
“What happens after that?” he said. “Most Lebanese people are surviving on just bread these days, we can’t have shortages again.”
Ukraine accounts for about 10 per cent of the world’s wheat and corn exports, and food security experts warn any interruption in supplies will lead to further price rises, with “catastrophic consequences” for poorer nations already facing acute food shortages.
In Lebanon, bread shortages and skyrocketing prices were common even before the Ukraine war. The country went into economic meltdown in October 2019 and its currency has since lost more than 95 per cent of its value against the dollar, leaving it struggling to afford wheat imports.
Reliant on Ukraine for up to 60 per cent of its wheat, Lebanon acutely felt the impact of Russia’s Black Sea blockade, which halted grain exports from Ukrainian ports following Moscow’s full-blown invasion of its neighbour in February. Long queues formed daily at bakeries and supermarkets this summer as people waited to buy a single bag of bread.
Shortages were eased after a UN-backed initiative unblocked grain shipments from Ukraine’s southern ports from July. Lebanon’s current supplies of wheat are sufficient to last two months, “with ships on their way”, according to Ahmed Hoteit, head of Lebanon’s association of mills.
But last week Russia suspended its participation in the deal. Vessels are still sailing through the Black Sea — the UN said 15 had departed Ukrainian ports on Monday and Tuesday carrying wheat, corn and soyabean meal. Vessels are believed to insured under existing cover until the end of this week, but insurers are not offering new quotes until an agreement can be made with Russia, according to a Lloyd’s of London consortium.
The UN said on Tuesday that talks were continuing between Russia, Ukraine and Turkey in Istanbul on resuming Moscow’s full participation in the Black Sea initiative. It said it had agreed with the Turkish and Ukrainian delegates that there would be no movement of vessels under the agreement on Wednesday.
Moscow’s decision could not have come at a worse time for Ukraine and its grain customers. The country’s crop sales normally accelerate around the harvest in September and October, with many nations in the Middle East and Africa building up their inventories at that time.
Grain prices, which initially jumped after Russia’s move, eased on Tuesday, with wheat trading on the Chicago Board of Trade at $8.73 a bushel. However this is still 50 per cent higher than the 2019-21 average.
David Laborde, senior research fellow at the International Food Policy Research Institute think-tank, said any decline in grain flows would be painful for countries such as Turkey, Lebanon, Sudan and Yemen. “This will exacerbate food insecurity and political tensions in these countries,” he said.
Even before Russia’s invasion of Ukraine, the Covid-19 pandemic and crop failures caused by climate change had damaged global food security. The war has hit the poorest countries hardest, with acute food insecurity now affecting 345mn people, said economists.
“Poor countries with high debt which are net importers of food, fertiliser and fuel are in serious trouble,” said Arif Husain, chief economist at the UN World Food Programme. Unless food and fertiliser flows were freed up, hunger would be caused not only by high prices, but also availability as farmers struggled to produce food, he warned. Instead of suspending the Black Sea grain deal, participants needed to discuss extending it when it ended in mid-November, he added.
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The economic damage wrought by the war has been significant, especially for those relying on grains and vegetable oils from Ukraine and Russia. Food price inflation has soared to 93 per cent in Turkey, while multilateral organisations have announced emergency measures to help poor countries.
This month, Lebanon’s parliament approved a World Bank loan worth $150mn to help finance its wheat imports. The World Bank has also announced emergency packages for Egypt and Tunisia.
Meanwhile, the IMF launched a “food shock window” — a facility for countries hit by the crisis, akin to an emergency import facility for food purchases proposed by the UN Food and Agricultural Organization this year. Malawi last month became the first country to sign up, with a $88.3mn agreement under the facility.
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Russia, the world’s largest wheat producer and exporter, is expecting a record crop this year. But it is unclear how much will flow on to world markets because while Russian food and fertilisers are exempt from western sanctions, some buyers and financing banks have steered clear of them.
Russia has said it is ready to supply 500,000 tonnes of grain directly to poor countries. On Monday night Lebanon’s public works minister Ali Hamieh tweeted that Russia would donate 25,000 tonnes of wheat to the country.
Losing the safety net of Ukraine’s exports is worrying, said Laborde: “We are in a very complicated situation. We need a buffer and to get that [we need] to get Ukraine back into the market. We don’t have a safety margin.”
Even under the Black Sea deal, Ukraine’s grain exports were still about half their prewar level. Before Russia’s full-scale invasion, most of the country’s exports were shipped through the waterway, and while it has tried to increase the amount of grain transported through canals to Romania’s Black Sea coast and onward, and by train to the rest of Europe, the capacity increases have been limited.
Failure to resurrect the deal will hit Ukraine’s farmers and their revenues, hampering their ability to produce next year’s crops. This means “we will be carrying the problem into 2023 and 2024”, warned Josef Schmidhuber, deputy director at the FAO’s trade and markets division.
Back in Beirut, Fares has started preparing for the worst: “I’m worried we’re going to go back to those long lines we saw this summer,” the baker said, recalling that he had to set up metal barriers to control agitated crowds. “It was awful having to turn so many hungry people away.”
Source: Economy - ft.com
