Regime’s imposed purchase price puts wheat stocks at risk: experts
Enab Baladi – Muhammed Fansa
The government of the Syrian regime has announced the purchase price of a kilo of wheat from farmers at around $0.3, describing the price as “encouraging” despite the fact that its value is less than the one set in 2022 ($0.5), which raises expectations of threatening results for the current strategic wheat season.
On April 18, the Council of Ministers set the price of purchasing a kilogram of wheat from farmers this year at 2,300 Syrian pounds, equivalent to less than $0.3, according to the exchange rate, which exceeded 7,800 pounds per dollar on the black market, according to the S-P Today website, which is specialized in tracking the exchange rate of the pound.
The purchase price set by the government this year is lower than the price of last season, which is 2,000 SYP per kilogram, when compared to the price of the US dollar, as it was equivalent to about half a dollar compared to the exchange rate of the dollar against the Syrian pound at the time when it was about 3,800 pounds.
According to the regime’s Prime Ministry, these prices were set after an “accurate calculation” of the cost of production in light of the support provided to the agricultural sector in terms of seeds, fuel, and fertilizers, and a profit margin for the farmer of 35% per kilogram.
The government also considered the price “encouraging” to deliver the crop and extract the largest possible amount of the farmers’ harvest.
“Unfair price under the pretext of subsidy”
International wheat prices appear to be close to or exceeding the price offered by the Syrian government to farmers.
“If we take into account the costs of shipping and the quality of soft Syrian wheat compared to international varieties, the price will be unfair,” farmers in regime-controlled areas told Enab Baladi.
The price of American durum wheat reached $371 per ton, Argentine wheat reached $338 per ton, and French wheat reached $277 per ton, according to the International Grain Council, an annual decrease of between 23 and 38% after the global rise in wheat prices following the Russian invasion of Ukraine.
The price of one ton of Russian wheat, which is the main resource for the regime’s government, was about $272.
Zuhair al-Qasim, a farmer from the al-Houla Plain in the countryside of Homs, told Enab Baladi, “The government always talks about subsidizing wheat cultivation and then imposes this unfair price under the pretext of negligible subsidies.”
Regarding the nature of the support provided, al-Qasim explained that the agricultural associations provide one liter of diesel at the cost of 4,500 Syrian pounds for each dunum planted with wheat and a bag of “urea” fertilizer for every five dunums, at a price that is 50,000 Syrian pounds less than the black market. While every three dunums, as a maximum, needs to be sprinkled with a bag of fertilizer to obtain feasible effectiveness. (Dunum=900 m2)
Because of the shortage, farmers are forced to buy the necessary quantities of fertilizer from commercial markets, and the farmer is also obligated to other expenses that are not subsidized by the government, such as the costs of pesticides and the fee for spraying one tank, which amounts to 50,000 Syrian pounds.
Amer al-Youssef, a farmer from the city of al-Rastan in the northern countryside of Homs, told Enab Baladi that the price of wheat approved by the government is “totally unfair,” and it barely covers the costs of cultivation, irrigation, and harvesting.
Al-Youssef pointed out that in 2022 the price was “very good” compared to the international price and the price of the dollar. As for this year, the price estimates are “catastrophic,” and the price does not exceed the production costs, demanding that a price be set between 3,000 and 3,500 pounds.
An agricultural engineer from the town of Talbiseh in rural Homs, who refused to reveal his name for security reasons, told Enab Baladi that the price of wheat this year will lead to many farmers quitting its cultivation in the next year, as the support provided is “weak,” and the price imposed is disproportionate to the costs.
The agricultural engineer expected that the fall in the price of wheat in the areas of influence of the regime would open the door for merchants to buy it from farmers and smuggle it to Lebanon.
Ahmed al-Khalaf, head of the marketing and processing office in the regime’s Peasants Union, warned that the imposed low price of wheat would create “a parallel market with higher prices than the set price.”
This parallel market may lead to the reluctance of farmers in the next season to plant this strategic crop and replace it with crops that provide better income for them, al-Khalaf told the government newspaper al-Thawra on April 20.
He added that the Union will communicate with the concerned government agencies to reconsider this pricing and secure a marketing reward for the farmers, which takes into account the real costs and great effort of the farmers and achieves a reasonable profit margin equivalent to at least part of their effort.
The head of the marketing and manufacturing office in the Peasants’ Union explained that the price should not be less than 3,000 Syrian pounds per kilo of wheat, stressing that this will be the Union’s most prominent demand during the grain conference, scheduled for May 6.
According to al-Khalaf, the government pricing did not take into consideration the costs of production and living for farmers and their families, such as transportation, food, education for their children, and others, noting that the current price of a kilo of bulgur in the market reaches 7,000 pounds, and a kilo of Freekeh (unripened wheat) reaches 20,000 pounds.
The expert in agricultural economics at Zaytoonah International University, Salim al-Nabulsi, added to Enab Baladi that the governments that support strategic crops, when purchasing the crop from farmers, cover production costs in addition to providing a profitable profit margin.
In the Syrian case with the strategic wheat crop, Dr. al-Nabulsi believes that the specified price is only close to covering costs.
It is possible that the government price could lead to the crop being smuggled out of Syria, given that there is a “very big” difference between the regime’s government price and international wheat prices, especially since the prices of Syrian durum wheat, which is used for making bread, is double that of its soft counterpart, and is in greater demand, Professor al-Nabulsi asserts.
He considered that the price of wheat, which does not cover costs, represents an indirect call to farmers to stop wheat production and move to cultivate other economically feasible varieties, as happened previously when the cultivation of black seed spread.
While the government of the regime raised the price of wheat this year by up to 30% compared to 2022, but at a lower actual value, it raised the price of buying tobacco by about 50% compared to last year.
This raised criticism from economists and farmers against the government for subsidizing this substance more than other strategic crops.
Professor of Agricultural Economics, Dr. Salim al-Nabulsi, predicted a decrease in the strategic reserves of this crop in Syria based on the government’s price to buy wheat and the need for imports to cover local demand, which in turn leads to a depletion of foreign currency.
The former Minister of Economy, Lamia Assi, asked in a post on her Facebook page about the pricing mechanism for buying wheat, given that mistakes are repeated every year in terms of pricing at less than the international price and discouraging farmers from cultivating wheat as if it has become an “adopted and permanent policy in the interest of importers.”
Assi indicated that these errors caused last year a decrease in the received harvest of wheat, which was not enough for more than three months, and then it was completed with imports, she said.
In July 2022, the Minister of Agriculture in the regime’s government, Muhammad Hassan Qatana, spoke in an interview with the Russian agency Sputnik about a decline in wheat production from what was expected for the last season to reach 1.7 million tons, despite the country’s need for 3.2 million tons of wheat.
In light of the insufficiency of the local product, the regime opens alternative doors to obtain the needs of the crops it controls, one of which is the “looted” wheat from Ukraine.
According to a Reuters report published in December 2022, the amount of wheat that arrived in Syria from the Ukrainian Crimea peninsula (which Russia informally annexed to its territory in 2014) has increased 17 times since the start of the Russian invasion of Ukraine on February 24, 2022.
The economist, Dr. al-Nabulsi, believes that the solution lies in re-pricing wheat under the base of covering costs, in addition to making a profitable profit for farmers, enabling them to continue producing this strategic crop, which is essential to food security.
if you think the article contain wrong information or you have additional details Send Correction