The Wheat Value Chain and Food Security in the Middle East and North Africa

The Wheat Value Chain and Food Security in the Middle East and North Africa Ghada Ahmed and Danny Hamrick Center on Globaliza7on, Governance and Compe77veness Duke University Food Working Group February 4th, 2015

Agenda Who we are GVC methodology Project overview: A Global Value Chain Analysis of Food Security and Food Staples for Major Energy- Expor?ng Na?ons in the Middle East and North Africa (MENA) Wheat value chain and food security in MENA Egypt case study Next steps 2

Who We Are 3

Environment Nutri7on Workforce Development Inclusive Development Food Security Agri- food Value Chains 4

The GVC Approach Top down the global economy with a focus on lead firms and inter- firm networks, using varied typologies of industrial governance Bo>om up a focus on countries and regions, which are analyzed in terms of various trajectories of economic and social upgrading or downgrading 5

GVC Analysis Inputs Processing Marke7ng Produc7on Trace the geographic spread of produc7on Map the compe77ve ecosystem of firms Conduct stakeholder analysis of firms & organiza7ons Analyze governance structures & enabling environment Iden7fy upgrading trajectories and bozlenecks 6

Minerva Project Overview Mul@- year project supported by US Dept. of Defense MINERVA Ini7a7ve 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 mul7ple variables and data sources Apply GVC approach to iden@fy vulnerabili@es and leverage points in key food commodi7es in MENA countries Iden@fy risks and strategic op@ons to improve food security in the region 7

What does the literature tell us about Food Security in the Middle East and North Africa? 8

Impact of Food Price Increases on Trade Balance (2007-2008) 9

MENA Country Typology and Level of Food Insecurity Resource-Poor Labor Abundant Resource-Rich Labor Abundant Resource-Rich Labor Importing Comoros Yemen Libya Djibouti Syria 1 Bahrain Mauritania Algeria Kuwait Somalia Sudan Oman West Bank and Gaza Iran Qatar Egypt Iraq 2 Saudi Arabia Jordan United Arab Emirates Lebanon Morocco Tunisia Israel* Acute Food Insecurity Moderate Food Insecurity Low Food Insecurity Food Security is measured as total exports divided by food imports and food production per capita. Low Risk is defined as having one or both measure above global average. Moderate risk is defined as having one or both below global average. Acute risk is defined as one or both measures less than 50% the global average. 1 Syria s food insecurity is acute due to the current civil war 2 Data not available Source: CGGC based on data from world Bank Development Indicators and Breisinger et al, 2010 10

Wheat Procurement Across MENA Morocco has imported 9.3% of MENA s wheat since 2007 Algeria has imported 16.6% of MENA s wheat since 2007 Libya Egypt has imported 25.9% of MENA s wheat since 2007 Syria Iraq Saudi Arabia Iran Mauritania Different regions within MENA rely on different countries as their leading source of imported wheat. Depending on the country, these rela7onships have persisted since 2007 Russia France No s7ckiness Australia SOURCE: FAO, total tonnage of wheat exported 11

What does the Wheat Global Value Chain Analysis add to Food Security Dialogues? 12

Wheat Global Value Chain Inputs Production Processing Marketing R&D Soft, Hard, Durum wheat Elevators Mills Bakeries Land Water Seeds Fertilizer Smallholders Large farms Cleaning Drying Blending Storage Flour Milling Packaging Supermarkets & Grocers Food manufacturers Wholesale Pesticide Machines Feed Milling Livestock production Labor Logistics Domestic International Trade Trading companies Offshore production Supporting activities and institutions Government Regulations Futures Trading Food aid Trade Policies Financial Intermediaries Infrastructure 13

Key Risk Factors Affec7ng Food Security in MENA Produc@ve Capacity Infrastructure & Services Business Environment Trade & Investment Policy Ins@tu@onal Elements Land Water R & D Access to inputs Agricultural Policies Standards & cer7fica7ons Transporta7on Storage Ports ICT Energy Government Coops Country & regional stability Public governance Grain tenders Access to finance Trade policies Foreign reserves Market access Export- import procedures Border transit 7mes Industry specific policies Public- private coordina7on Subsidies & price controls Monitoring & accountability Marke7ng Government Control 14

Primary Ownership across Wheat GVC Inputs Farms Elevators Mills Retail Egypt Iran Saudi Arabia Syria UAE Ownership characteris@cs: State Private Both 15

Lead Firm Capabili7es Input Suppliers Grain Farms Grain Traders Grain Facili7es, logis7cs & Terminals Bulk Grain Buyers Grain Millers Processors Financial Services e.g. credit and deriva7ves ADM Bunge Cargill Louis Dreyfus Glencore 70-90% of grains traded interna7onally are managed by the ABCDs Source: CGGC based on company reports, literature review & interviews 16

Wheat GVC Governance in MENA Complexity Codifiability Capability TNCs Global traders drive the flow of wheat & are involved in most of the VC Government Agencies Governments influence the chain through policy, grain standards, subsidies, marke7ng & trade but highly depend on traders strong weak 17

How is the CGGC applying the GVC in country cases studies? 18

EGYPT CASE STUDY Bread, Freedom and Social Jus@ce 19

EGYPT GVC 2000s and 2013 Production Processing Consumption 2000s Small & Medium Farms 8 million tons Storage 6 months Imports 10 million tons Mills Bakeries < $.01/ loaf (govt. subsidized price) No enforcement of rationing at 7 loaves Currency Reserves $36 billion Production Processing Consumption 2013 Small & Medium Farms 9.5 million tons Red: Acute disruption points in wheat GVC Storage <3 months Importing 4-5 million tons Currency Reserves $18.9 billion Mills Bakeries Bread rationing at 3 loaves 5.5 % price increase in wheat flour 2.3% price increase in bread Available bread $0.7/ loaf 20

Egyp7an BoZlenecks and Leakages Inputs Production Processing Marketing Resource Scarcity Market Access Infrastructure Deficit Lack of Transparency Water Aggregators Storage Black Market Seed Diverted U7liza7on Transport Monitoring Fer7lizer Lack of technology Mills Bread Weight 21

Egyp7an BoZlenecks and Leakages Inputs Production Processing Marketing Resource Scarcity Market Access Infrastructure Deficit Lack of Transparency Water Aggregators Storage Black Market Seed Diverted U7liza7on Transport Monitoring Fer7lizer Lack of technology Mills Bread Weight 22

Egyp7an Policy Response Marketing Lack of Transparency Black Market Storage Monitoring Transport Bread Weight 23

Next Steps Research: Black Sea Wheat GVC: Russia, Ukraine & Kazakhstan MENA Corn GVC Food security in Maghreb countries Working Papers: Food Security and Wheat Value Chains in MENA Shioing Governance Structures in the Wheat Value Chain: Implica7ons for Food Security in the Middle East and North Africa Egypt Case Study 2015 Middle East Dialogue Conference in Washington DC 24

Ques7ons? Ghada Ahmed ghada.ahmed@duke.edu Danny Hamrick danny.hamrick@duke.edu