Mideast countries that are already struggling fear price hikes after Russia exits grain deal
CAIRO –
Ahmed Salah grew anxious when he heard the news that Russia had suspended a vital wartime grain deal. The bakery proprietor in Egypt’s capital is anxious it may imply world meals costs soar.
“There mightn’t be immediate impact,” the 52-year-old mentioned final week as he oversaw staff baking bread in his store in Cairo, “but if they didn’t find a solution soonest, things would be very difficult.”
Russia pulled out of the deal brokered by the U.N. and Turkiye to permit Ukraine’s grain to circulate throughout a world meals disaster. It helped stabilize meals costs that soared final 12 months after Russia invaded Ukraine — two international locations which are main suppliers of wheat, barley, sunflower oil and different meals to growing nations.
Egypt, the world’s largest wheat importer, and different lower-income Middle Eastern international locations like Lebanon and Pakistan fear about what comes subsequent. Struggling with financial woes which have pushed extra individuals into poverty, they concern rising meals costs may create much more ache for households, companies and authorities backside traces.
Many have diversified their sources of wheat, the primary ingredient for flatbread that may be a staple of diets in lots of Mideast international locations, and do not count on shortages. Pakistan has even seen a bumper crop regardless of unprecedented flooding final 12 months.
But the tip of the grain deal is creating uncertainty about worth hikes, a significant driver of starvation.
It “is an unnecessary shock for the 345 million acutely food insecure people around the world,” mentioned Abeer Etefa, a spokeswoman for the UN’s World Food Program.
Turkish President Recep Tayyip Erdogan informed Russian President Vladimir Putin in a telephone name Wednesday that he’s pushing to increase the grain deal as a result of the long-term cutoff of Ukrainian ports “does not benefit anyone” and low-income international locations “will suffer the most,” in response to an announcement from Erdogan’s workplace.
Russia, in the meantime, is launching assaults on Ukrainian ports and agricultural infrastructure, main world wheat costs to zigzag. Despite the volatility, the prices are beneath what they have been earlier than Russia invaded Ukraine, and there may be sufficient manufacturing to fulfill worldwide demand, mentioned Joseph Glauber, senior analysis fellow on the International Food Policy Research Institute.
But for low-income international locations like war-torn Yemen or Lebanon which are massive wheat importers, discovering suppliers which are farther away will add prices, he mentioned. Plus, their currencies have weakened towards the U.S. greenback, which is used to purchase 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,” mentioned Glauber, former chief economist on the U.S. Department of Agriculture.
“They’re certainly as high as they were during the high points of 2022,” he mentioned.
That packs strain on governments, which must pay extra to maintain subsidizing bread on the identical degree and keep away from elevating prices for households, he mentioned. With many additionally seeing their international foreign money reserves dwindle, it may put international locations within the Middle East and elsewhere in a extra precarious monetary scenario.
Salah, the bakery proprietor, fears that if wheat costs spike, Egyptian President Abdel Fattah el-Sissi’s authorities may reply by climbing costs of bread.
“Such move would have heavy toll on ordinary people,” he mentioned.
In this picture launched by United Nations, a U.N. official of the Joint Coordination Centre carries out an inspection on board of the majority cargo ship TQ Samsun, which traveled from Odessa, Ukraine, loaded with grain, whereas is anchored within the Black Sea, close to the doorway of the Bosphorus Strait in Istanbul, Turkey, Monday, July 17, 2023. Russia lately halted a breakthrough wartime deal that allowed grain to circulate from Ukraine to international locations in Africa, the Middle East and Asia the place starvation is a rising risk and excessive meals costs have pushed extra individuals into poverty. (United Nations by way of AP)
El-Sissi and different leaders raised issues about increased meals costs at a summit Russia hosted for African nations final week. He known as for reviving the Black Sea deal by way of a “consensual solution” that takes into consideration “all parties’ demands and interests and put an end to the continued surge in grain prices.”
Homegrown grain would not meet even half of Egypt’s demand, notably wheat and corn. It buys over 10 million tons of wheat — largely from Russia and Ukraine — and that’s anticipated to develop.
Local wheat manufacturing is predicted to stay at 9.8 million tons, whereas consumption will increase by two per cent to twenty.5 million tons in 2023-2024, in response to a USDA report from April.
However, the federal government mentioned the affect of the tip of the grain deal is minimal up to now. Supply Minister Ali Moselhi mentioned final week that Egypt has diversified its sources of imported wheat and that its stockpile would cowl the nation’s wants for 5 months.
Its wheat purchases from Ukraine have declined by 73.6 per cent over the 2021-2022 interval as Egypt tapped different sources, the USDA mentioned.
Any enhance in wheat costs would additional pressure Egypt’s financial system, which has struggled from many years of mismanagement and out of doors shocks just like the COVID-19 pandemic and struggle in Ukraine. That may power the federal government to chop nonsubsidy spending and push up inflation, Capital Economics mentioned.
Food prices already are fueling a cost-of-living disaster. Annual inflation hit a document 36.8 per cent in June, with meals costs skyrocketing by 64.9 per cent.
In Lebanon, the grain deal’s collapse may very well be a further hurdle because the tiny Mediterranean nation depends on Ukraine for a minimum of 90 per cent of its wheat, flour millers say.
The settlement helped resolve provide shortages that shocked the market through the onset of the struggle, inflicting giant breadlines and rationing. Caretaker Economy Minister Amin Salam mentioned any detrimental affect on wheat costs following the deal’s collapse will “certainly” have an effect on costs at dwelling.
The nation of some six million is within the throes of an financial disaster that has impoverished three-quarters of its inhabitants. Its most important wheat storage silos have been destroyed within the Beirut port blast in 2020, so its grain reserves lie fully in non-public mills’ storage.
“We currently have two months’ worth of wheat reserves, and we have one month’s worth on the way,” mentioned Wael Shabarek, proprietor 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 financial system retains shrinking, its foreign money has misplaced 90 per cent of its worth since 2019 and the World Food Program says native meals costs are among the many highest on this planet.
Pakistan, in the meantime, is a vivid spot. It was a significant importer of Ukrainian wheat however this 12 months had the best home manufacturing in a decade regardless of disastrous flooding in 2022. The bumper crop is attributed to offering seed and different help to farmers.
The authorities nonetheless requires restoration of the grain deal to make sure world meals safety and keep away from surging costs. Pakistan, whose ailing financial system is getting a $3 billion International Monetary Fund bailout, was hit onerous when meals costs surged after Russia’s invasion.
“The Ukraine conflict has also brought difficulties for developing countries and the Global South, particularly in terms of fuel, food and fertilizer shortages. Pakistan is no exception,” Foreign Minister Bilawal Bhutto Zardari mentioned.
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AP reporters Kareem Chehayeb in Beirut; Munir Ahmed in Islamabad, Pakistan; and Courtney Bonnell in London contributed.
