Global  Value  Chain  Analysis  of  Food  Security  and  Food  Staples  for  Major  Energy-­‐  Expor?ng  Na?ons  in  the  Middle  

East  and  North  Africa:    Russia  Focus  

Ghada  Ahmed  Danny  Hamrick  

 SMA  Lecture  Series  

Tuesday  September  8th,  2015    

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•  Mul$-­‐year  project  supported  by  US  Dept.  of  Defense  MINERVA  Ini?a?ve  and  Army  Research  Office  for  University-­‐Led  Research    

•  Collabora$on  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  mul?ple  variables  and  data  sources  

•  Apply  GVC  approach  to  iden$fy  vulnerabili$es  and  leverage  points  in  key  food  commodi?es  in  MENA  countries  

•  Iden$fy  risks  and  strategic  op$ons  to  improve  food  security  in  the  region  

Minerva  Project  Overview  

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GVC  Analysis  

 

•  Trace  the  geographic  spread  of  produc?on  •  Map  the  ecosystem  of  firms,  ins?tu?ons  &  policies  •  Analyze  governance  structures  &  enabling  environment  •  Determine  upgrading  trajectories  &  boFlenecks  •  Address  economic,  social  &  environmental  challenges  

Inputs   Processing   Marke?ng  Produc?on  

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Wheat Global Value Chain Inputs

R&D

Seeds Fertilizer

Pesticide Machines

Soft, Hard, Durum wheat

Smallholders

Large farms

Cleaning

Elevators

Feed Milling Livestock production

Food manufacturers

Wholesale

Supermarkets & Grocers

Production Processing Marketing

Blending

Trade

Trading companies

Domestic International

Drying

Mills

Flour Milling

Packaging

Offshore production

Labor

Supporting activities and institutions

Government Regulations Futures Trading Food aid Trade Policies Financial Intermediaries Infrastructure

Logistics

Land Water

Storage

Blending

Bakeries

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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  rela?onships  have  persisted  since  2007  

Morocco  has  imported  9.3%  of  

MENA’s  wheat  since  2007  

Egypt  has  

imported

25.9%  

of  MENA’s  wheat  

since  2007  

France  Russia   Australia  No  s?ckiness  

Libya  

Syria  

Mauritania  

Saudi  Arabia  

Iran  Iraq  

Wheat Procurement Across MENA  

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Dependency  on  Russian  Trade  

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Climate   Policy   Poli?cal  Tension  

Stability    MENA  

 Commonwealth  of  Independent  States  

Ukraine,    Bal?c  countries    

 

Russian  Wheat  Policy  Timeline  

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1980s            1990s                    2000s                          2006      2008      2010        2014  

Soviet  Union  was  a  large  grain  importer  to  support  protected  livestock  sector  

Market  liberaliza?on  led  to  decrease  in  livestock  sector  subsidies  led  to  decrease  in  need  for  animal  feed,  became  small  grain  exporter  and  meat  importer  

Improvements  in  grain  yields,  despite  a  drop  in  ag  subsidies,  increased  domes?c  supply  allowing  for  more  exports,  emerged  as  a  leading  exporter.  Agroholdings  emerge  

World  food  prices  surge,  farmers  return  to  fallow  land,  GOR  increase  support  to  ag  sector,  livestock  sector  receives  bulk  of  benefits  

World  economic  crisis  hits  Russia,  places  an  export  tax  on  wheat    

Drought  causes  GOR  to  ban  exports  in  August  2010  –  June  2011.  GOV  also  required  all  traders  to  abrogate  contracts  with  foreign  buyers,  produc?on  decreases  

Russia  absorbs  Crimea  &  over  2million  ppl,  bans  ag  imports  (poultry  &  beef)  from  the  West  and  imposes  stringent  export  controls  that  halts  wheat  export        

Russian  Wheat  Value  Chain  

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Processing   Consump$on  

Agroholdings  –  47%  Family  Farms  –  42%    Small  Enterprises  –  9%        

-­‐  Agroholdings  are  mostly  ver?cally  integrated  (transport,  mills,  ports,  storage,  expor?ng)  -­‐  Small  producers  sell  to  processors  or  traders    

Domes?c  consump?on  –  bread,  animal  feed  Exports  –  Egypt,  Turkey,  Yemen  &  Iran    

Production

Vulnerabili?es    

Climate   Policy  &  trade  bans  Logis?cs   Infla?on  

Leading  exporters  of  grains  in  Russia  

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38%  by  Interna?onal  Firms  e.g.  Glencore,  Cargill  

35%  Domes?c  firms  e.g.  RIF  

26%  small  local  actors  

1%  by  the  state  agency  United  Grain  Company  

Source:  Forthcoming  Ahmed  et  al,  2015  

Wheat  export  ports  

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Glencore,  Kernerl  Group  of  Ukraine  &  others  

United  Grain  Co.  (50%),  Summa  Group  

Outspan  Interna?onal    

Source:  Forthcoming  Ahmed  et  al,  2015  

What  is  the  impact  of  Russia’s  economic  downturn  on  the  

wheat  chain?  

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Economic  Sanc?ons  

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March  2014  US  &  EU  Sanc?ons    

August    2014  Russian  counter  sanc?ons  

IMF  es?mates  Russian  real  GDP  reduced  by  1-­‐1½  %  

Source:  IMF,  2015,  Forthcoming  Ahmed  et  al,  2015      

•  Russia  is  the  top  des?na?on  for  EU  agricultural  products  aner  the  USA  

•   Producers  from  expor?ng  countries  experienced  price  drop    •  Counter  sanc?ons  supported  by    about  87%  of  the  popula?on    •  Import  bill  for  food  products  decreased  by  almost  42%  in  January  2015    

•  Imposed  embargo  led  to  price  spikes  in  domes?c  market  

Oil  Prices  Dropped  

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The  Ruble  Dropped  

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Infla?on  remains  elevated  in  Russia  

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Risks  to  the  wheat  value  chain  

•  The  private  sector  is  facing  many  issues  •  Statements  to  rein  in  wheat  exports  •  Phytosanitary  cer?ficates  only  to  four  countries    

•  Ships  are  stuck  at  Novorossiysk  and  logis?cal  boolenecks  

•  Non-­‐availability  of  grain  at  the  port  implies  shupng  down  exports  

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THANK  YOU!  QUESTIONS?  

Ghada  Ahmed  Ghada.ahmed@duke.edu  

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