Miller Magazine Issue: 118 October 2019

26 NEWS MILLER / OCTOBER 2019 Currency crisis in Lebanon threatens wheat supply China opens soymeal market to Argentina Lebanese millers said wheat stocks had fallen to a dangerous level, warning the country may face a supply crisis unless dollars needed to import the grain are supplied at the official rate, the National News Agency reported. In a statement, the Lebanese millers’ association urged officials to find a solution for dollars to be supplied at the official price “so the owners of the mills can resume their work and import the country’s wheat need”. The Lebanese pound has been pegged against the dollar at a level of 1,507.5 pounds for more than two decades. Dollars and pounds are legal tender in Lebanon. Lebanese central bank governor Riad Salameh said that dollars are available and banks were meeting customer demand. The central bank had not re- ceived any official complaints about dollar availability, he said. The millers’ association said it was determined to supply flour to bakeries at the official Lebanese pound price “but the prob- lem is that converting Lebanese pounds to U.S. dollars has be- come very costly”. This had led millers to issue invoices in U.S. dollars “to preserve operating capital and the continuation of our work”. “The wheat reserve at the mills has fallen to a level that represents a danger, and this may expose the country to a supply crisis if the U.S. dollar problem is not resolved,” it said. Hassan Assaf, a member of the millers’ association, said banks had been gradually curbing supply of dollars for two months. Wheat reserves held by private millers had fallen to 1-1/2 to two months of supply from four months, he told Reuters.”We can’t place import requests because we cannot secure dollars to open credit lines,” he said. Prices charged by money exchange houses for dollars had touched as high as 1,580 pounds, he said. The Lebanese economy has suf- fered from a slowdown in capital inflows from abroad that have long been used to finance the government budget and current account deficit. The central bank’s foreign assets, ex- cluding gold, fell around 15% from an all-time high in May last year to $38.7 billion in mid-September. China allows the import of soymeal livestock feed from Argen- tina for the first time under a deal announced by Buenos Aires, an agreement that linked the world’s top exporter of the feed with the top global consumer. The pact was signed by Argentine and Chinese officials in Buenos Aires on 11th September. Beijing has been loathe to accept Argentine meal because it prefers to import raw soybeans and process them in China to promote its own crushing industry. But the trade war has been turning global supply chains on their head. Argentina had tried for years to break into the Chinese mar- ket, the biggest consumer of the meal it uses to feed its massive hog herd. China, with its own crushing industry to protect, had steadfastly resisted. The U.S.-China trade war, however, strengthened Ar- gentina’s hand, prompting China to ex- pand its soymeal import options. Being able to export to China is a big boost for Argentine crushers whose margins have been falling, with idle capacity increasing to more than 50%. Crushers in Argentina are expected to ship meal to chicken farms, easing concerns about falling demand from the nation’s huge pig herd, which is shrinking because of African swine fever, according to Argenti- na’s crop export and crushing chamber Ciara-Cec. Argentine PresidentMauricioMacri, said the agreement would bolster jobs in the agricultural sector and create more opportu- nities for Argentine farmers. “Our country is the top exporter of soybean meal and now one of the largest markets in the world has been opened,” he said. “This is a historic agreement,” Gus- tavo Idigoras, president of Argentina’s Ciara-Cec chamber of grains exporting companies told Reuters, though he added the deal still required a two-step process of plant authorizations and then registrations that could take several more months. Argen- tina and China still need to jump through bureaucratic hoops before cargoes of soy meal can set sail. Final approval of sanitary rules and Argentina’s crushing plants should happen in October, Ricardo Negri, head of Argentina’s agricultural sanitary agency, Senasa, said. Inclusion of meal on China’s customs register is expected before the end of the year, paving the way for shipments in the first months of 2020, Negri said. The meal manufactured in the giant crushing plants that dot the banks of Argentina’s Parana River, clustered around the country’s main grains hub of Rosario, is exported mostly to Southeast Asia, Europe and Northern Africa. China imports only small amounts of soymeal currently, none of it from Argentina. Argentina, the top global exporter of processed soy, expects to export a total of 26 million tonnes of soymeal this year globally, and 8.5 million tonnes of raw beans.