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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Ghada AhmedGhada.ahmed@duke.edu

www.cggc.duke.edu

Thank You!

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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