PORTLAND, OREGON, US – Lebanon, a country mired in an increasingly desperate food insecurity crisis, received some good news last week when it was announced that the first shipment of grain (27,000 tonnes of corn) to leave the Port of Odesa since Russia agreed to lift its five-month blockade of Ukrainian ports was destined for the Port of Beirut.
This positive development has been tempered somewhat by recent reports that the shipment has been delayed for undisclosed reasons. Even if that shipment and subsequent others eventually arrive in Lebanon, it only will make a marginal difference to a country whose economy is collapsing under the weight of record-high inflation and unemployment, an analyst from Mercy Corps, a US-based humanitarian organization, told World Grain.
“It seems possible on a political level Ukraine is prioritizing Lebanon,” Alexander Harper, a humanitarian analyst for Mercy Corps, told World Grain. “It’s a market that’s close and Lebanon came out early on and made a statement against Russia for the invasion (of Ukraine). Syria, which is right next door, didn’t, and is also repeatedly receiving grain that Russia has been accused of stealing from Ukraine. I think Ukraine is making an effort to ship grain to Beirut as a bit of a reward.
“I think Beirut will continue to get more Ukrainian shipments, which will stabilize its tenuous access to grains. That is definitely a positive. But there are so many other issues facing the Lebanese, including basically not being able to afford to eat because of the severity of the economic crash inside the country as well as high food prices internationally.”
The onset of Lebanon’s economic catastrophe can be traced to late 2019 when the country’s banking system collapsed just before the COVID-19 pandemic began wreaking havoc on the world, leading to lockdowns and global supply chain dysfunction that lingers 2½ years later.
Another significant and unexpected economic blow occurred on Aug. 4, 2020, when a massive explosion in the Port of Lebanon destroyed a large complex of silos that stored nearly 90% of the country’s grain reserves. The blast, which killed 220, injured more than 6,000, and caused extensive property damage in a huge swath of the nation’s capital, occurred when a large amount of fertilizer being stored at the port was ignited by sparks from a fire at an adjacent warehouse. Remarkably, fireworks were stored inside the same building as the fertilizer, which only added to the intensity of the explosion.
In many countries, an attempt would have been made to tear down the damaged silos and install new ones as quickly as possible. But economic conditions are so dire — the World Bank last year said the situation in Lebanon is likely to rank among the top 10, and possibly top three, most severe crisis episodes globally since the mid-19th century — that replacing that storage capacity is beyond its means, Harper said.
Harper said imported grain is taken directly to storage at various flour mills and food processing plants across the country.
“Basically, Lebanon is now dependent on the storage flour millers have on site in a decentralized model,” Harper said. “The country’s completely bankrupt; services are collapsing across the board. The idea of rebuilding those silos — that’s going to take a long time. For now, they estimate they have six weeks of (wheat) storage capacity in the country, well below what would be ideal.”
This extreme tightening of wheat stocks has contributed to the price of bread skyrocketing to about nine times higher than it was in the fall of 2019 in a country with a staggering 44% unemployment rate and stagnant wages for those lucky enough to have a job.
Although it is essentially bankrupt, the Lebanese government has continued to provide a significant bread subsidy, which helps pacify the Lebanese population that is increasingly angry at their government. The subsidy is not universally popular, however.
“The bakeries and millers still have to pay dollars for fuel and lots of other inputs to the breadmaking process,” Harper said. “They are seeing a lot of their margins taken away. They get their profits right now mainly from sweet products like croissants, which aren’t government regulated so they can price it themselves.”
Adding to an already difficult situation are reports that bread and flour are being smuggled into neighboring Syria, whose economic situation mirrors that of Lebanon. In recent years, Lebanon has seen several million refugees from war-torn Syria come across its border.
Harper said the tension between the Lebanese and Syrian refugees has started to boil over in recent months, including in bread lines.
“A report recently described 49 violent incidentsin July, and many of them were due to the fact that Syrians were in bread lines,” he said.
In a move that should provide at least some temporary stability regarding the supply of bread, the Lebanese parliament on July 26 approved a $150 million World Bank loan to import wheat.
“That should stabilize access to wheat in the short and medium term,” he said. “It will at least give the country access to these grains through the end of the year.”
Harper said the speed at which Lebanon’s economy collapsed was devastating. In a matter of months, Lebanon went from a position of relative economic stability to dire straits. He described it as “the perfect storm” of government corruption, a collapsed banking system, COVID-19 pandemic restrictions, supply chain woes and seeing most of its grain reserve capacity vanish in a terrifying explosion.
“It was a situation where Lebanon itself was kind of a middle-income country,” Harper said. “A lot of our programming was developmental work up until last year. Now we’ve had to switch to emergency, humanitarian work. Before, emergency assistance to Lebanon was mainly to support the Syrian (refugee) population, but now it’s also increasingly including the Lebanese people.”
Like most countries that are highly dependent on grain imports from the Black Sea region, Lebanon views the prospect of once again receiving grain shipments from Ukraine as a positive development, but not a game changer.
“I don’t have high expectations regarding its impact on prices; there are so many other issues going on internationally in the supply chain,” said Harper, noting that there’s also a fear that the deal between the two warring nations won’t hold. “It seems like the price of commodities is not as clearly linked like it used to be to the price of the derivative product on the shelves.”