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A Global Value Chain Analysis of Food Security and Food Staples for Major Energy-Exporting Nations in the Middle
East and North Africa
Ghada Ahmed, Danny Hamrick, Sona Nahapetyan and Gary Gereffi – Duke CGGC at SSRILincoln Pratson – Nicholas School of the Environment at Duke
Ghada Ahmed, CGGC, Duke UniversityMINERVA Annual Meeting, Washington DC, September 15, 2016
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High food prices can be a tipping point
Food Inflation Riots, Spark Worries for World Leaders
— Wall Street Journal, April 14, 2008
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Social stability is sensitive to food prices
Global
Local
Top down – the global economy with a focus on actor networks, using varied typologies of “governance”
Bottom up – a focus on countries and regions, analyzed in terms of economic, social and environmental “upgrading” or “downgrading” 4
Approach
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Food Security
DomesticRegional
International
Dimensions of Food Security
Geographic Scope
Actors
Availability
ProductionStorage
Access
PricesIncomes
Distribution Marketing
Utilization
Domestic
End Use Diet
Stability
DomesticRegional
International
Shockse.g.
weather, markets, &
unrest
GovernmentTradersFirms
IntermediariesBakeries
FarmersBakeries
Households
GovernmentTradersBanks
Drivers of Food Security
The methodology investigates …
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Inputs
R&D
Seeds
Land
Water
Fertilizer
Pesticide
Machines
Soft, Hard, Durum wheat
Smallholders
Large farms
Cleaning
Weighing
Grading
Elevators
Feed MillsLivestock production
Food manufacturers
Bakeries
Wholesale
Supermarkets & Grocers
Production Processing Marketing
Blending
Biofuels
Trade
Trading companies
Domestic
International
Certification
Mills
Milling
Packaging
Storage
Offshore production
RefineriesLabor
Supporting activities and institutionsGovernment Regulations Futures Trading
Food aidTrade Policies Financial Intermediaries
Infrastructure
The wheat global value chain
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ADMBungeCargill
Louis DreyfusGlencore
Input Suppliers
Grain Farms
Grain Traders
Bulk Grain
Buyers
Grain Millers Processors
Grain Facilities, logistics & Terminals
Financial Servicese.g. credit, futures,
derivatives
70-90% of grains traded internationally are managed by the ABCDs
Lead Firms market, process, finance and transport key commodities
Source: CGGC based on company reports & literature review
Cheap bread impacts 75% of the population in Egypt
Bakeries
Production Processing Consumption
• Bread rationing • Food subsidy 2% of
GDP• Available bread
$0.7/loaf
Small & Medium Farms
Red: Acute disruption points in wheat GVC
Currency Reserves 50% to $18.9 billion
Source: Suez Canal & Tourism
Mills
Importing 4 - 5 million tons
Storage <3 months
8Source: CGGC based on on 2013 data from primary and secondary sources
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Bread, oil and water are key to gaining power in the Syrian conflict
SOURCE: FAO, total tonnage of wheat exported
Algeria has imported
16.6%of MENA’s
wheat since 2007
Different regions within MENA rely on different countries as their leading source of imported wheat. Depending on the country, these relationships have persisted since 2007
Moroccohas imported
9.3% of MENA’s wheat
since 2007
Egypthas
imported
25.9% of MENA’s
wheat since 2007
France Russia AustraliaNo stickiness
Libya
Syria
Mauritania
Saudi Arabia
IranIraq
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Russia is the largest supplier of MENA’s wheat
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Low oil prices and currency devaluation impacted Russian trade
March 2014 US & EU
Sanctions
August 2014 Russian counter
sanctions
IMF estimates Russian real
GDP reduced by 1-1½ %
Source: IMF, 2015; Ahmed et al, forthcoming
Oil price drop in 2014
January, 2014$1=34 RUBDecember,
2014$1=80 RUB
High InflationTrade Barriers
Russia
• Import bans• Frequent
draughts and high weather variability
• Limited access to finance• Export production is
concentrated in central Russia• Infrastructure deficit
• Trade embargos and restrictions
• Oligopolistic markets
• Currency devaluation, inflation and regional stability
MENA• Water
insecurity• Arid land
• High subsidies• Low
productivity
• Price Controls• Infrastructure
deficit
• Limited port and storage capacity
• Low foreign reserves
• Government intervention, high global prices and infrastructure problems
Inputs Production Processing Trading
Currency devaluation and trade barriers introduce uncertainty
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APENDIX
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Project Overview• Multi-year project supported by US Dept. of Defense MINERVA Initiative and
Army Research Office for University-Led Research
• Collaboration with the Nicholas School of the Environment to study food security in the Middle East and North Africa (MENA)
• Rank food security of MENA countries based on multiple variables and data sources
• Apply GVC approach to identify vulnerabilities and leverage points in key food commodities in MENA countries
• Identify risks and strategic options to improve food security in the region
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GVC contributes to studies of stability by examining the nexus of policy and trade
Domestic Policy
Food Prices
Global Political
Economy
Social(In)Stability
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Oil Prices Dropped
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The Ruble Dropped
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Inflation remains elevated in Russia
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Wheat export ports
Glencore, Kernerl Group of Ukraine & others
United Grain Co. (50%), Summa Group
Outspan International
Source: Forthcoming Ahmed et al, 2015
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Leading exporters of grains in Russia
38% by International
Firms e.g. Glencore,
Cargill
35% Domestic firms e.g. RIF
26% small local actors
1% by the state agency United Grain Company
Source: Forthcoming Ahmed et al
