(MENAFN- Gulf Times) Countries in the Middle East and North Africa that subsidise food for their citizens are catching a break, even as the global oil slump hammers the region's economy.
From Iran to Morocco, the cost of importing basic grains such as wheat and barley will plunge by as much as a third to the lowest in at least five years, according to the Rome-based UN' Food & Agriculture Organisation. The FAO will release global data in October.
After two years of bumper global harvests, cheaper grain will help ease the blow of a plunge in oil revenue in a region that supplies more than a third of the world's crude but can't produce enough of its own crops. Many people in the area rely on their governments to ensure affordable basic food supplies. In 2010 and 2011, surging food costs contributed to street protests from Oman to Egypt, Tunisia and Morocco in the so-called Arab Spring.
Since then, global costs fell 35% from a record.
"The Middle East is getting a significant respite from lower food prices," Edward Coughlan, head of Middle East and North Africa analysis at BMI Research, a unit of Fitch Ratings Ltd, said in London. "Food-price inflation is very low across both oil importers and exporters. Any unrest due to higher food prices seems unlikely at this stage."
Oil-importing nations will benefit the most from declining prices of both food and fuel.
The large deserts and dry climates of Middle Eastern and North African countries mean their governments are among the most dependent on foreign grain to feed people. The region accounts for about a third of global wheat imports, with Egypt the world's top buyer and Algeria at No 3, according to the US Department of Agriculture.
Many of their citizens also spend a larger share of their income on food than people in richer nations. In Egypt, food takes up about 40% of the average household budget, compared with about 13% in the US and 15% in the European Union, according to data from the UN World Food Programme, European Commission and US Bureau of Labor Statistics.
Of the 10 countries included in the food-cost data provided by the FAO, Tunisia and Iraq were the only ones where an increase in costs was forecast for 2015-16.
The grain-import bill for Iran, the second-largest oil producer in the Organisation of Petroleum Exporting Countries, will tumble about 33% to $3.04bn in the year through June, the FAO data show. Algeria will see an 11% decline to $3.16bn, while costs will be the lowest in five years or more for countries including Egypt and Saudi Arabia, the world's largest oil exporter.
Morocco's spending on imported grain will tumble 35% to $1.16bn, and will slide by almost half from the 2010-11 marketing year, when protests against rising living costs among other grievances forced the government to make concessions. For Tunisia, expected to boost imports this year after local output shrank, costs will sink 18% from 2010-11, when clashes led to the overthrow of the government.
"We don't see Saudi Arabia removing any food subsidies" on lower oil prices, Layla Abuzaid, chief executive officer at Riyadh-based Tharawat Business, an agricultural commodities trader owned by Saudi prince Turki bin Salman, said in an interview.
While the slide in food costs may help authorities keep a lid on opposition, it won't come close to making up for revenue lost by oil producers. Crude prices are down about 50% in the past year, after dropping below $40 a barrel to a six-year low last month. Saudi Arabia exported $285bn of petroleum last year, according to Opec, compared with a grain-import bill for 2015-16 that the FAO estimates at $4.29bn.
Nations that have invested in expanding domestic agriculture in recent years will spend less on imports, said Abdolreza Abbassian, a senior economist at the FAO. Egypt will produce 8.4mn metric tonnes of wheat in the 2015-16 season, the most in three years, while Morocco's output will jump to a record, the USDA estimates.
"Some countries like Egypt and Jordan, especially, they import both a lot of oil and food," said Torbjorn Soltvedt, an analyst in Bath, England, for commodity risk consultant Verisk Maplecroft. "For these countries, this is going to have quite a big impact on the government coffers."
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