Map of Libya
A chaotic political situation with continuing conflict, an economy in poor condition because of reduced oil production, and a weakening currency has Libya’s grain producing, processing and marketing sectors facing enormous challenges. Food shortages are frequent with 20% of the population (1.3 million) needing humanitarian assistance, according to the United Nations. Of those, 400,000 need food aid. Refugees and the internally displaced face some of the greatest problems.

The International Grains Council (IGC) puts Libya’s total wheat production in 2017-18 at an unchanged 200,000 tonnes. The IGC forecast for durum production is an unchanged 100,000 tonnes. The country’s grain imports in 2017-18 are forecast to fall to 3.4 million tonnes, down from 3.6 million in 2016-17. Wheat imports will be unchanged at 1.4 million tonnes. Imports of barley in 2017-18 will be 1.3 million tonnes, down from 1.5 million in the previous year.

A lack of functional milling capacity has increased imports of wheat flour. According to the IGC, in 2017-18 wheat flour imports will be 90,000 tonnes, up from 85,000 tonnes the year before.

Dorit Cohen of the grains export promotion section of the U.K.’s Agriculture and Horticulture Development Board, British Cereals Exports, explained that the former Office for Cereals had become two organizations: in the Tripoli region and in Benghazi.

“The U.K. is still a supplier of barley right until today,” she said. “In terms of wheat, they have to import it in the form of flour. The U.K. is a supplier of barley because it is based on price and it is feed barley. Libya is one of the main recipients of U.K. barley along with Tunisia, Algeria and Saudi Arabia.

“You’ve got two rebel governments basically that have seized power in different parts of the country — one in Benghazi, one in Tripoli. They are importing. They say it’s private but it’s not. It is still government. They just do it privately, but it is still government controlled.”

She explained that Libya’s main wheat suppliers are Italy and France, as well as the Black Sea region.

The United Nations Food and Agriculture Organization (FAO) explained that, despite the ceasefire deal in July 2017, conflict continues to halt economic recovery and deteriorate food security prospects.

“Security-related uncertainties disrupted procurement and distribution systems, resulting in income losses for farmers unable to market their production and leading to food shortages in urban areas,” the FAO said in a Global Information and Early Warning System Country Brief.

“Refugees, asylum seekers and internally-displaced are among the most vulnerable,” the FAO said. “Food shortages have been reported mostly in the south and east, where basic food items, including wheat, bread, flour, pasta, oil, milk and fortified blended foods for children, are in short supply.”

Libya wheat imports
Source: U.S. Department of Agriculture
Written ahead of the start of planning of winter grains in October, the report said conditions were favorable.

“Cereals are mostly cultivated in the coastal regions, where rainfed production or cropping with supplementary irrigation is possible, and in the arid south under full irrigation,” the FAO said. “Wheat is used exclusively for human consumption, while all the other cereals are used as animal feed.

“The country relies heavily on imports (up to 90%) for its cereal consumption requirements, mostly wheat and barley. By the end of 2017, the WFP aims to assist up to 175,000 beneficiaries (including both domestic population and refugees) affected by the crisis following the disruption of basic social services and the Public Distribution System.”

The FAO said Libya’s economy is highly dependent on oil, which accounts for more than 80% of state revenue.

“Domestic oil production has recovered faster than expected following the end of the conflict in 2011,” the FAO said. “However, it is currently well below the 2010 level of 1.55 million barrels per day due to clashes between groups in the oil-producing regions to gain permanent control of key facilities.”

After a contraction in the Gross Domestic Production (GDP) in 2011 by almost 60% due to the fall in oil production, the economy grew by over 92% in 2012 (year-on-year), the FAO said.

wheat flour
Wheat Flour subsidies removed

According to an October 2017 report produced by REACH, an organization that aims to inform humanitarian action, in partnership with the Libya Cash & Markets Working Group (CMWG), the wheat flour market has been affected by the authorities’ inability to directly purchase or subsidize wheat imports.

“Wheat has been imported irregularly since 2014, which has affected the availability of domestically milled wheat flour,” the report said. “Due to the budget shortfalls faced by the central government, wheat flour subsidies have been removed, both through direct support of bakeries as well as distributions through jam’iyat (except in Benghazi, where wheat flour is still partly subsidized by the local government).”

The jam’iyat are a network of consumer associations.

“Across the country, there are 57 mills out of which 20 are currently producing wheat flour,” the REACH report said. “Out of the 20 mills that have remained operational, 7 are large-scale factories, while the rest are small processors. There are only 3 mills located in the south.”

The production capacity of these mills varies from 70 to 1,000 tonnes of wheat flour per day, REACH said.

“The National Flour Mills Company, or matahan, is the authorities’ official importer of grain in Libya and a key player in the wheat flour market,” REACH said. “It runs two large mills near Tripoli and Benghazi and one in the south, and produces around 30,000 tonnes of wheat flour per month. The rest of Libyan mills are privately owned.”

The wheat flour produced by local mills used to be distributed not only to retailers but also to the Price Stability Fund (PSF), REACH said. The PSF is a government organization that is tasked with supplying subsidized food items to the population.

“It distributes the goods through its network of consumer associations (jam’iyat), which are located in each neighborhood in Tripoli, Benghazi and Sebha,” REACH said. “Consumers buy subsidized goods from jam’iyat at a significantly reduced price, which is set by the government.”

The jam’iyat in Tripoli and Sebha have not been active since 2014, REACH said.

“As a result of the PSF’s inability to pay its debts, mills across the country have stopped dealing with the PSF and now sell wheat flour directly to bakeries,” REACH said. “As wheat imports have decreased, locally milled wheat flour has become temporarily unavailable on several occasions. The gap has been filled by imported, already ground wheat flour from abroad, the price of which has increased many-fold since 2014.”

Consumers have been facing an increase in wheat prices.

“Due to a combination of higher prices, the removal of subsidies, consumers’ lack of liquidity and reduced purchasing power, the demand for wheat flour has halved since 2014 and lower levels of consumption have been observed,” REACH said. “The most critical disruption to the wheat flour supply chain was caused by macroeconomic factors, including the Central Bank’s decreasing foreign reserves and the fiscal crisis. As a result of the dwindling foreign reserves and state funds, mills across the country have been severely restricted in importing the necessary amounts of wheat from abroad. With the beginning of the economic crisis, matahan and private mills have not been receiving sufficient letters of credit from the state, which are a requirement for wheat imports.”