An agricultural vehicle on land in the Bekaa Valley. (Credit: João Sousa/L'Orient Today)
During Wednesday’s cabinet meeting, the caretaker government of Najib Mikati included two key agenda items: the long-awaited promotion of a cohort of military officers and the UNIFIL mandate. Additionally, the government took the opportunity to address another long-overlooked matter arising from the 2019 crisis: the reinstatement of financial compensation for local wheat and barley producers.
In practical terms, the state purchases locally produced soft wheat (utilized for bread flour), durum wheat (used in pasta and bulgur production), and barley (primarily for animal feed) at a predetermined price.
The objective of this initiative is to provide support to the local industry and ensure a portion of Lebanon’s requirements are met, as highlighted by caretaker Agriculture Minister Abbas Hajj Hassan, in an interview with L’Orient-Le Jour.
“The government plans to repurchase approximately 60,000 tons of grain in 2023, including soft wheat, durum wheat and barley,” Hassan said. “It is important to note that Lebanon’s monthly requirement for soft wheat alone stands at 20,000 tons.”
Antoine Hoyek, the president of the Farmers’ Association, welcomed this development as positive news but emphasized the need for concrete actions. He suggested that buy-back prices should be slightly higher than international prices to incentivize producers.
Ibrahim Tarchichi, president of the Bekaa Growers and Planters’ Union, expressed the importance of a transparent mechanism and timely payment to ensure the farmers’ trust and confidence in the initiative.
Meeting scheduled with the Finance Ministry
“The cabinet granted its approval, and a meeting has been scheduled for Thursday with the Finance Ministry to finalize the payment details,” Hassan stated.
L’Orient-Le Jour viewed the minutes, which documented the decision, on Wednesday evening. The minister confirmed that the new mechanism, currently applicable only to the 2023 production, has been optimized.
The implementation of the scheme will involve the Agriculture Ministry and the Economy and Trade Ministry, specifically its General Directorate for Cereals and Sugar Beet. The Industrial Research Institute [a Lebanese nonprofit] will assist in classifying the various grain categories.
Furthermore, a committee comprising representatives from both ministries has been established. Hassan also mentioned that the security forces and the army will be involved to ensure transparency in the mechanism.
Under the plan, payments for wheat and barley will be made in lira, but the price per ton will be set in dollars and converted at the Sayrafa platform exchange rate “determined by the Banque du Liban (BDL) at the time of payment, “as stated in the cabinet’s decision. The exchange rate currently stands at LL86,200 to the dollar, as of the latest update on Wednesday evening.
The state has determined the following prices for the grain: $270 per ton for soft wheat, $290 per ton for durum wheat, and $240 per ton for barley.
According to Hassan, these prices are higher than the global market prices. This is because the state will cover the difference between the Sayrafa exchange rate and the prevailing market rate.
As of Wednesday evening, the parallel market rate was fluctuating between LL93,000 and LL94,000 to the dollar.
According to the decision, the projected quantities for repurchase include 25,000 tons of soft wheat, 25,000 tons of durum wheat, and 5,000 tons of barley. The total cost, in Lebanese lira, is estimated to be LL1,310 billion (LL1,310,240,000,000 precisely), as validated by the cabinet.
This translates to approximately an additional $14 to $15 million, depending on the exchange rate employed. Hassan said that the state will bear these expenses, with BDL being responsible for the payment. The specific funding sources were not disclosed, but it is certain that they will be included in the budget.
In terms of logistics, while the state will provide the payments to the farmers, it will be the millers who store the grain, process it, and subsequently engage in its resale.
Until 2022, Lebanon predominantly imported wheat for Arab bread production from countries like Russia and Ukraine. Notably, the price of wheat is still subsidized in Lebanon, making it one of the few commodities to receive such support. The financing of wheat imports is facilitated through an emergency project funded by the World Bank.
The World Bank approved a total of $150 million for this project in May 2022, which was subsequently endorsed by Parliament in October of the same year.
This article was originally published in French in L'Orient-Le Jour. Translation by Sahar Ghoussoub.
