Wheat traders challenge Syrian officials' one-year reserves estimate

Fri Feb 8, 2013 2:41pm GMT

* International traders doubt officials' reserve estimates

* Officials say 3 mln tonnes in reserve, enough for a year

* Say two major silos disused among 32 silos in state hands

* State using private mills to compensate for Aleppo loss

By Suleiman Al-Khalidi

AMMAN, Feb 8 (Reuters) - International traders challenged Syrian officials' estimates that the government has enough wheat stored to last a year despite the raging 22-month revolt against President Bashar al-Assad's rule.

Wheat and other foods are excluded from Western trade sanctions imposed on Assad's government but dealers say difficulties in financing grain purchases because of banking sanctions have deterred international trading firms from participating in Syrian grain tenders.

But Syrian officials told Reuters this week that wheat reserves stood at about three million tonnes, roughly one year's supply, boosted by last year's harvest of about 2.3 million tonnes and about 700,000 tonnes of mainly Ukrainian and Black Sea origin wheat bought in the 12 months to January.

Some Middle Eastern traders say barter deals with Ukrainian state agencies and Iran have helped Syria maintain purchases during the last year.

"The silos that are spread across all governates have enough stocks for at least a year," said a senior official from the country's state-run General Establishment for Cereal Processing and Trade (HABOOB) who said the quantities were "secure".

Syria traditionally kept wheat stocks of about 3 million tonnes, before the revolt against Assad, and as much as double that after bumper harvests.

"They have used a lot of their strategic stocks and while they are doing their utmost to buy as much as they can, they are unable to purchase bigger volumes as the country is still under embargo," said a Middle East-based trader.

Officials say only two major silos in northern Syria were under rebel control, and were damaged, out of a total of 32 major concrete and metal silos with a capacity of 3.5 million tonnes that remain under government control.

Rebels gained territory last July in and around the northern city of Aleppo, the country's economic hub and largest city, capturing at least 20 state mills, they said.

Private mills and imports from Lebanon and the Ukraine were compensating for state mills lost in Aleppo, which had supplied at least 60 percent of the country's total national flour milling needs, according to traders and officials.

In the northern western Syrian city of Deir al-Zor, rebels ransacked silos and a major silo in the town of Al Bab was bombarded by air to prevent rebels emptying its 43,000 tonnes of locally produced wheat stocks, traders and officials said.

"Some wheat quantities have been stolen but the major silos where wheat is available are still in our hands and well maintained," said the senior grain official in Damascus, who was contacted by phone and who requested anonymity.

Official estimates that the quantities of wheat that were either damaged or stolen from state warehouses since the crisis erupted in March 2011 stood at about 200,000 tonnes.

Across government controlled areas, private and state milling flour capacity in January was about 8,000 tonnes daily after dropping by almost half at the outset of the troubles in Aleppo last July, officials said.

At least 2,000 tonnes of flour per day is now processed by private mills supplied with wheat by the authorities.

Idle private mills in areas across the country's major cities still in government hands from central Damascus, Idlib, Deraa to Hama, have been forced to step up operations to boost production, a major Damascus based grain commodities trader in touch with the authorities said.

This has eased shortages combined with a crackdown on profiteering traders, boosting private bakeries production and rushing imports by land of at least 100,000 tonnes of flour from Lebanon and a 40,000 shipment from Ukraine.

PRICES SOAR

Syrian wheat purchases in the Middle East and Asia have been at higher prices than paid by other regional buyers and in smaller quantities, dealers said.

Earlier this week Syria issued a new tender to purchase 100,000 tonnes of soft milling wheat with a March 4 deadline.

"Grain shipments are reaching Syria and their cargo ports are operating, but the cargo sizes are much smaller and usually they are parcel-sized consignments," a second Middle East-based trader said.

"Syrian coastal vessels are active in the trade and it gives you an idea of the complexities in doing deals. The bigger players and shipping companies are wary of trading Syria now," he said.

Syria remains on a list of areas deemed high risk by London's marine insurance market, which is also likely to be adding to overall shipment costs.

Local Syrian traders have found lucrative opportunities to make profits as shipping costs for imports from the Black Sea to Syrian ports have stayed at the same cheaper rates.

A kilo of bread now sells closer to market prices at about 100 Syrian pounds ($1.4), four times its fixed price, residents in several areas across Syria said.

Last month the U.N. aid agency the World Food Programme (WFP) has said there were signs of availability problems with wheat flour and bread.

"The sharp reduction in milling capacities, by about 75 percent in Aleppo, is affecting the supply of wheat flour and bread in all Syria and particularly in western governorates of Lattakia, Idleb and Tartous," WFP said in a report. (Additional reporting by Jonathan Saul in London; Editing by Louise Ireland and Veronica Brown)