By Sarah El Safty and Hadeel Al Sayegh
CAIRO (Reuters) – Wheat importers are under threat of delivering politically sensitive bread supplies to the Middle East and North Africa (MENA) after Russia’s invasion of Ukraine closed off access to cheaper cereals from the Black Sea on which they depend.
The ensuing dispute halted shipments from Ukrainian ports, while financial sanctions cast doubt on payments for Russian wheat purchases, traders and bankers say, adding another risk for MENA governments. already struggling with import costs, economic crises or conflicts. .
“Everyone is looking for other markets because it’s becoming more and more impossible to buy stocks from Ukraine or Russia,” a Middle Eastern commodity banker said, citing disruptions to shipping, l escalating sanctions and rising insurance premiums.
“The market does not expect Ukrainian and Russian exports to pick up until the fighting is over,” said a trader.
Soaring world prices and possible export restrictions make it costly to switch to other origins, while options for expanding local production in the MENA region are limited by water scarcity and rising input costs.
While the Gulf countries are protected by budget surpluses, other MENA countries, including Egypt and Lebanon, “remain among the most vulnerable in the world, given the dependence on wheat imports and the high household food expenditure,” Monica Malik, chief economist at Abu Dhabi Commercial Bank, said.
Egypt, often the world’s biggest importer, bought 80% of its wheat from Russia and Ukraine last year, traders said.
But since Russia invaded Ukraine, its national grain buyer has canceled two tenders due to lack of bids and high prices, while two shipments are stuck in Ukrainian ports.
Egyptian officials say wheat reserves and the upcoming local harvest are enough to supply subsidized bread for about nine months. But they already expect to pay up to $950 million extra in the current budget due to higher prices and could see an erosion of strategic reserves.
Egypt’s commercial bread market could be more at risk due to lower inventories, traders said. Local wheat and flour prices have risen 23% and 44% respectively since the start of the Russian invasion, said Ezzat Aziz of the Cairo Chamber of Commerce.
Algeria, another major buyer, says it has enough grain reserves to last until the end of the year, but readmits imports of French wheat, suspended after a dispute over France’s colonial role there. from North Africa.
Russia and Ukraine account for about 29% of world wheat exports. But with their supplies uncertain, Chicago wheat futures hit a 14-year high on Monday.
“Importers will have to pay on average 40% more for wheat than before the invasion,” said a second trader.
And while Algeria, Libya and Gulf oil producers may find higher wheat import costs offset by rising hydrocarbon revenues, other governments have no such cushion.
In Lebanon, which is suffering one of the worst economic crises in modern history, wheat supplies were only a month old when Russia invaded Ukraine.
In Tunisia, shrinking bread stocks, flour rationing in shops and problems with the mooring of wheat imports have raised doubts about official claims that there is enough supply to last until April. summer.
Meanwhile, Morocco is expected to increase grain imports after its worst drought in decades.
In Syria, whose economy has suffered from years of conflict, a source familiar with the matter said the government could rely on reserves, but acknowledged costs would rise.
Poverty and humanitarian needs are on the rise.
“There is local wheat, they will try to produce more, but of course there is a problem. Some people won’t be able to eat, there will be hunger,” said a trader based in Syria.
And there are signs that some European countries could limit grain exports after Hungary announced an immediate export ban on Friday, while Bulgaria plans to buy wheat for its reserves, which producers fear. announce such a decision.
Romania said it sees no need to restrict exports at this time.
“The difficult part is countries like Egypt, Morocco or Lebanon that are suffering the double whammy of Black Sea imports (cessation) and higher prices,” said Ahmed Morsy, senior analyst at Eurasia. Group, based in the United States.
(Reporting by Sarah El Safty and Patrick Werr in Cairo, Hadeel Al Sayegh and Maha El Dahan in Dubai, Michael Hogan in Hamburg and Gus Trompiz in Paris; Writing by Aidan Lewis; Editing by Alexander Smith)