May 5, 2022
What is happening with wheat in Lebanon?
First, in general, there is essentially no hard currency available for purchasing any commodities from outside the country. As an importer, you need to convert Lebanese pounds to dollars, then you must circumvent the country’s undeclared capital controls to pay exporters. Now, the central bank is legally bound at this point to offer wheat importers a more favorable exchange rate than the market or “street” rate, a subsidized rate. So wheat is subsidized and remains an affordable source of calories for people. But the government is negotiating with the IMF, whose cash is going to come with conditions, one of which may be, and there’s precedent for this, that the subsidies, including wheat subsides, be removed.
What about the crisis? Is there a crisis?
So 10 days ago the price of a bag of bread, which is about 900 grams, went up. And there were reports on social media that it went to 25,000. Then it went back to down to 12,000. From time to time, you get news of these spikes in wheat demand triggered by a currency crunch that would lead someone who’s looking instantaneously at the situation to say, oh, there’s a crisis. But if you put the spike in context its just a blip on the pound’s long downward trajectory, the years’ long rise in wheat prices.
Are we at some kind of inflection point now where things are taking a different turn?
No, it’s just the continuation of a trend, an affordability issue, not an availability issue.
Did the destruction of the grain silos in the port contribute to the affordability issue?
I think that the silos were mostly unused before the explosion. I think the explosion has been dramatic in its destruction of livelihoods and local economies and therefore its impact on food security. But as for the silos, from what I’ve read, and I haven’t inspected them, they were mostly in a state of disrepair. Wheat is imported "just in time.” There are no reserves, as in other countries.
Why does Lebanon import most of its wheat? Can’t we grow our own?
It has to do with agrarian policies, demand, and price. Other countries subsidize the production of wheat, so they can undercut local Lebanese wheat prices, which are not subsidized. Lebanon produces about 20 percent of the wheat it consumes; it’s not used for breadmaking but for special products, like burghul. The Ministry of Agriculture put out a plan to double wheat production in the next five years. Whether that plan will be realized or not is a different issue.
Where is most of Lebanon’s wheat coming from? Has that changed significantly in the wake of the Ukrainian crisis?
The mostly commonly cited statistic is that Russia and Ukraine produce about 30 percent of the wheat that is traded. About 20 percent of what’s produced globally gets traded. The rest is consumed locally. So it’s what you’d call a “thin” market. But last year’s harvest exceeded the global requirement, so there was a surplus.
Lebanon imports somewhere between 70 and 80 percent of its wheat from Russian and Ukraine. It varies by the year. But let me qualify this statement. Lebanon gets its wheat from there because it’s the cheapest. So importers may just turn to different, lower priced sources.
It’s a big question as to how the conflict—because the frontline is very much localized—will affect wheat production throughout the country. War in one location of the country does not preclude the continuation of economic activity in another part of the country. More damaging may be the halt of Russia’s fertilizer exports which support global wheat production.
There are other markets from where we can get wheat and they’re available today. There are surpluses in North and South America, India. Lebanon is now negotiating with India. Lebanon’s needs are small, a small Indian surplus could feed Lebanon. And the reason there is movement on this issue is because of the upcoming elections.
Arabic bread is a staple of the Lebanese diet, do Lebanese need to learn how to live without (or with less) bread?
There is way too much reliance on wheat. This crisis is an opportunity to rethink that reliance on all wheat products, like pasta, biscuits, and other items. When we talk about food security, we only talk about wheat, as if that is all people need. And that’s not the case. A more diverse diet full of fruits and vegetables would be healthier.