Analysis: Is Albania at Risk of a Wheat Crisis?

Josif Silo, the 60-year-old farmer from the village of Potgozhan in the Lower Mokra area, planted five dunums of wheat this year. Josif claims that he hopes to harvest some three KV (300 kg) of wheat this year.

He expects that 70% of his yield will be used as flour for his own bread, while the remaining grains will be used for animal feed. He says it is impossible to plant more land with wheat, as costs have been increased by the doubling of nitrate, urea and fuel prices, and there is a labour shortage in the countryside.

“The rains that fell in June helped the wheat crops. If the weather until July, when the harvest season will start, will be stable, the production is expected to be good,” he said.

However, the yield is expected to be lower than the previous years.

“Wheat needs two doses of nitrate and urea. I have only used nitrate once, as we could not afford the high price. Last year, the price of nitrate was 2,000-5,000 ALL/kv; this year, it reached 10,000 ALL. The lack of workforce is also a concern. In the village, you can no longer find young people to work the land,” he said.

He explains that much of the population has emigrated or moved to cities, making it hard to step up production.

“For years, since the boys left to live in Tirana, we have been planting wheat only for the family’s consumption. We can’t afford more crops,” he told Monitor.

According to the Ministry of Agriculture, in 2021, the area cultivated with wheat in our country will be 54,514 hectares, with a production of 225,171 tons. The Ministry of Agriculture and Rural Development told Monitor” that the grain produced covers about 50% of the country’s demand.

The problems encountered over the years, such as land parcelling and especially the low price of wheat, have hindered the development of economies of scale in planting crops.

Adi Haxhiymeri, the administrator of the “Primo” flour company, said, “The main problem is the low price of wheat. Since farmers plant in small areas, the cost of planting wheat is very high. For this year, we have an advantage, as large farms have increased, with farmers with mechanized units, which have increased the planted areas of wheat from 10-100 hectares. For 2022, from the contacts with farmers so far, it appears that the crops will be good, the yield will be higher, and we think that we will keep the same quotas”.

The parcelization of agricultural land, the lack of irrigation canals and high production costs, even for importers, are considered the main factors for the low production of cereals in Albania.

Albanian farmers produce wheat to meet their needs while the mill factories are not supplied.

“This year, due to the high temperatures and the increase in the price of agricultural inputs, it is predicted that the local harvest will also be in decline. Bloja factories are not supplied with local wheat, as there is no good quantity and quality of production,” he added.

The President of the Farmers’ Union, Eduart Sharka, points out that estimates have found that only 50% of agricultural land is used as arable land or 603,000 hectares, while the rest is vacant.

“The total land area in Albania is 2,875,000 ha, of which 699,000 ha, or 24%, is agricultural land (excluding pasture), 36% forest, 16% permanent pasture and 24% other. About 43.3% of agricultural land is located in plain areas, 34% in hilly areas, and 22.7% in mountainous regions. The agricultural land located more than 300 meters above sea level is very fragmented, with a lack of access to irrigation and under the constant threat of erosion,” he said.

The farms are extremely small, with about 1-1.5 hectares of agricultural land each. In the context of the crises of the pandemic and the war we are going through and in the context of a possible food crisis that is knocking, Albania must think about increasing the cultivation of cereals to meet at least 50% of the needs for grains, Sharka added.

Knowing that consumption has decreased due to changing lifestyles and dwindling population, it is entirely possible, he explained, noting that in the fields of Korça and Tërbufi, there are areas and opportunities to make some competitive farms. But to do this,  entrepreneurs should be subsidized to purchase land and modern agricultural machinery.

“Extensive production is also possible, but small farmers should be subsidized per production unit. It is an emergency and necessity to invest in these agricultural crops. This year, it is expected that local wheat will be collected at 50 ALL/kg, almost below cost price,” he concludes.

At the end of July, the cost of wheat in the foreign market is expected to increase again beyond the current value of $490 a tonne. Meanwhile, 2022 will be the second year in a row that world wheat production will enter a steep decline.

The contraction in production will be caused by export restrictions from the Russia-Ukraine war and extreme heat temperatures damaging crops. For this reason, countries worldwide are lining up to buy wheat from new sources.

The Ministry of Agriculture says that it will develop new strategies for the next year, in addition to free oil and support from schemes which will be more helpful to farmers.

“The wheat situation in the world is already known. We have come to the aid of farmers, reimbursing them for oil. Over 200,000 farmers have benefited from free oil for 2022. They have also received support from IPARD schemes with agricultural machinery, benefiting from 50-55% grants for agricultural machinery,” the ministry said.

“The area planted with corn is about 58,000 ha, and compared to other years, it has increased by about 5%. The total amount produced in the country is 400,000 tons, while we import about 100,000 tons. Even for corn, the situation looks good, from contacts with farmers”, they added.

Russia, one of the main grain suppliers in the world, is considered an essential factor in the wheat and flour supply chain for the Albanian market as well.

Due to the war and the sanctions imposed on Russia for the 4th month of 2022, the weight of grain imports from Serbia has increased, accounting for 47%. Cereals imported from Russia account for 25% of the total four-month imports, marking a year-on-year decrease and 28% from other countries.

In 2021, according to INSTAT data, the share of imports from Russia and Serbia will account for 84% of the total cereal revenues (42% each).

Wholesalers say they are currently not facing problems with wheat imports.

Haxhiymeri warns that this period of calm will end very soon since, with the harvest season’s closure, the wheat price for September to December will increase significantly.

“The situation is not expected to be good. The months before the start of the wheat harvest season is the calm before the storm. The beginning of the harvest season will show more clearly the production situation, but the forecasts are not positive. There will be limited supplies. Last year, due to the pandemic, wheat production fell by 25 million tons compared to the 2019-2020 production.,” he said.

“I emphasize that the price of wheat is expected to become very expensive. The cost of storage will also affect the price increase.”

He noted, however, that Albania is unlikely to face famine like countries in Africa and the Middle East.

” It will be impossible for these countries to make supplies, as the prices will be unaffordable,” he said.

Roland Hysa, from “Miell Tirana”, told Monitor that the continuation of the war would complicate the supply situation, while it is expected that new rules for imports will also be implemented. According to him, many countries will be supplied with wheat from China bought in Russia, with higher prices and extra transport costs.

“Russia is a country that controls fuel, gas, pesticides and also wants to control the trading of grains. To cope with this situation, the circulation of suppliers will be carried out. The states will not be supplied directly from Russia but from China, which will buy Russia’s wheat. After buying wheat to cover its own consumption, China will sell the rest to other countries. Under these conditions, the price of wheat will always have an upward trend,” he said.

Wheat in Albania is mainly imported from Serbia and in small quantities from Romania. The price of grain from these countries is being bought at 485-490 USD/ton, according to Haxhiymeri. The selling price for distant cities like Saranda reaches 82 to 85 ALL/kg due to the high cost of transportation and the increase in oil prices. The sale prices of mass flour in the country from April are determined by the Transparency Board.

Ukraine’s grain reserves are in danger of rotting due to the impossibility of transportation. “Imports from Ukraine are blocked. Two months ago, we ordered the purchase of two ships with wheat, but it is impossible for them to come”, said Hysa.

Twenty-five million tons of wheat have been blocked in the ports of Odesa in Ukraine, and 98% of grain exports pass through Odesa. “Transporting wheat through alternative ports in Romania, Bulgaria, and the Baltic countries is difficult. Before the war, Ukraine exported about 5 million tons of grain per month. Last month, we managed to extract only 1.1 million tons”, Mykola Solskiy, Minister of Agriculture, told The Economist. 

Milling factories say that the increase in the price of flour has influenced the decrease in consumption. For one of the wheat importers, the purchasing power for flour has shrunk by 30-40% compared to years. Haxhiymeri emphasizes that the drop in consumption has been influenced by increased prices.

“In this period, consumers are more careful with spending their income. If before, a family would buy a few packages of flour at home for cooking pancakes or pizza today, it is established that families do not buy flour beyond their needs. They buy as much as they have planned to consume, not more,” he says.

Due to the rising bread cost in March, many consumers started baking it at home. As the chairman of the Association of Bread, Pastries and Doughs, Gëzim Peshkopia has previously stated that production capacity in bakeries was reduced by 20 to 25%.

“Buying at bakeries was replaced by buying flour for cooking bread or pancakes at home. The decline in the capacity of bakeries is the highest in rural areas, as they are more familiar with bread production at home,”  he said.

In times of crisis, the hardest-hit countries are the poor ones because poor people spend a significant portion of their income on food. According to Eurostat data, Albania is the country that spends the most on bread in Europe and has the most expensive bread concerning income.

According to Eurostat, the nominal expenditure on bread and cereals, as a percentage of the Gross Domestic Product (GDP – which measures the value of final goods and services produced by the economy in a year) in Albania was 4.8%, in 2020, the highest in Europe. The second country behind us is Romania, with 4% of GDP, as expenditure on bread and cereals, Montenegro, with 3.9% of GDP, followed by Bosnia-Herzegovina with 3.1% and North Macedonia, with 3%.

In absolute value, the average expenditure per inhabitant on bread and cereals is EUR 220 a year, the highest in the region.

For 2021-2022, the price of bread has increased three times in a row, with a total increase of 71%. The first tightening started in September last year when a loaf of bread increased to 80 Lek from 70 Lek.

In the middle of March, the price of bread increased again, reaching 100 ALL, while the price of 120 lek was seen in Korça, Pogradec, Gjirokastra and Saranda due to the increase in the cost of transporting raw ingredients.

Tags: crops, Production, wheat, yield, Albania, animal feed, harvest, price, Grains