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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
Middle East Dialogue February 26th, 2015
Agenda
• 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)
• GVC methodology • Wheat value chain and food security in MENA • County case studies • Next steps
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• 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
Minerva Project Overview
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What does the literature tell us about Food Security in the Middle East and North Africa?
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Impact of Food Price Increases on Trade Balance (2007 – 2008)
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RICE +102%
WHEAT +112%
MAIZE +204%
Food Price Increases from 2005 -‐ 2011
MENA Country Typology and Level of Food Insecurity
Resource-Poor Labor Abundant
Resource-Rich Labor Abundant
Resource-Rich Labor Importing
Comoros Yemen Libya Djibouti Syria1 Bahrain
Mauritania Algeria Kuwait Somalia Sudan Oman
West Bank and Gaza Iran Qatar Egypt Iraq2 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 2Data not available Source: CGGC based on data from world Bank Development Indicators and Breisinger et al, 2010 6
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 rela7onships 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 s7ckiness
Libya
Syria
Mauritania
Saudi Arabia
Iran Iraq
Wheat Procurement Across MENA
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What does the Wheat Global Value Chain Analysis add to Food Security Dialogues?
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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”
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GVC ANALYSIS
• 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 bojlenecks
Inputs Processing Marke7ng Produc7on
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Food Security
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Domes7c Regional
Interna7onal
Dimensions of Food Security
Geographic Scope
Actors
Availability
Produc7on Storage
Access
Prices Incomes
Distribu7on Marke7ng
U7liza7on
Domes7c
End Use Diet
Stability
Domes7c Regional
Interna7onal
Shocks e.g.
weather, markets, & unrest
Government Farmers Firms Traders
Government Traders
Intermediaries Bakeries
Farmers Bakeries
Households
Government Traders Banks
Drivers of Food Security
CONCEPTUALIZING FOOD SECURITY AND VALUE CHAINS
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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Key Risk Factors Affec7ng Food Security in MENA
• Land
• Water
• R & D
• Access to inputs
• Agricultural Policies
• Standards & cer7fica7ons
Produc;ve Capacity
• Transporta7on
• Storage
• Ports
• ICT
• Energy
• Government Coops
Infrastructure & Services
• Country & regional stability
• Public governance
• Grain tenders
• Access to finance
Business Environment
• Trade policies
• Foreign reserves
• Market access
• Export-‐import procedures
• Industry policies
Trade & Investment
Policy
• Public-‐private coordina7on
• Subsidies & price controls
• Monitoring & accountability
• Marke7ng
Ins;tu;onal Elements
Government Control
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Egypt
Iran
Saudi Arabia
Syria
UAE
Inputs Farms Elevators Retail Mills
State Private Both Ownership characteris;cs:
Primary Ownership across Wheat GVC
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How do we apply GVC Analysis to country cases?
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1970s 1980s 1990s 2007 onwards 2000s
Self-‐Sufficiency Strategy Import-‐Based Strategy
• Targe7ng self sufficiency
• Achieved self sufficiency • Increased tariffs on wheat &flour
imports (100%) • Subsidies peaked to $3 billion
• Reduced wheat subsidies • Introduced wheat produc7on quotas • Reduced import wheat tariffs
• Started phasing wheat produc7on & incen7ves • Water stress became a policy priority • Ministry of Water created
• Increasing wheat imports • Investment in offshore
agriculture • Expand wheat infrastructure • Introduced price controls &
increased social spending Source: CGGC based on FAO, 2011; Al-‐Zahrani, 2009, Shejy, 2004, Al Majery, 2009
Saudi Arabia’s Wheat Policy Timeline
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1970s and prior 1980s 1990s 2012 onwards
• Increase in government control of wheat value chain within Egypt
• Crea7on of PBDAC to help supply farmers with inputs
• Gradual easing of government control in terms of land use requirements and forced selling to government
• 1989-‐Last increase in the cost of subsidized bread
• Wheat price increases and stagnate cojon prices strains government
• Protest over several issues, including bread availability
• Overthrow of Mubarak government
• Elimina7on of subsidized fino flour and bread easing of import restric7ons for private firms using fino
• 1996-‐ Producers of fino flour and bread required to use imported wheat and shami flour subsidy eliminated
2000s
• Policies focus on doubling storage silos
• A\empted increase in domes;c produc;on
• Reduc;on in imports • Wheat Shortages • Overthrowing of Morsi
government
Source: CGGC based on Kherallha et al 2000, Goldman 2013, MacFarland 2013
Egypt’s Wheat Policy Timeline
Mills
Production Processing Consumption
Storage Inland Silos moved
to Ports
Mills
Bakeries
Production Processing Consumption
Bakeries
9.5 million tons
2012: 6,000 farmers 1993: 34,000 farmers
Imports- Increasing 12.5 %/year
Importing 4 - 5 million tons
Small & Medium Farms • Price fixing $0.27/loaf
• Food subsidy 0.24% of GDP • Increase labor and flour costs • About 25% of bakeries will go
out of business • Up to 100% increase in bread
prices
• Bread rationing at 3 loaves
• Food subsidy 2% of GDP
• Available bread $0.7/loaf
Storage Need for Modern
Silos
Small & Medium Farms
2013 Saudi Arabia Wheat Value Chain Vulnerabili;es
2013 Egyp;an Wheat Value Chain Vulnerabili;es
Red: Acute disruption points in wheat GVC
Currency Reserves Source: Oil
Currency Reserves Source: Suez Canal & Tourism
Saudi Arabian Bojlenecks
Resource Scarcity
Limited Capacity
Infrastructure Deficit
Inputs Production Processing
Water
Land
Storage
Transport
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Price Controls
Marketing
Bakeries
Dependency on interna7onal markets: global price vola7lity & limited feasibility of offshore produc7on
Egyp7an Bojlenecks
Resource Scarcity
Market Access Infrastructure Deficit
Lack of Transparency
Inputs Production Processing Marketing
Water
Seed
Fer7lizer
Aggregators
Diverted U7liza7on
Lack of technology
Storage
Transport
Mills
Black Market
Monitoring
Bread Weight
20 Dependency on interna7onal markets: global price vola7lity,
access to foreign currency, & trade bans
Food Security
Egypt Saudi Arabia
Food
Availability
Wheat Imports
Domes7c Produc7on
Offshore Produc7on
Food Security Strategy 2000 and 2014
High Low Moderate =2000 =2013 21
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 – Shising Governance Structures in the Wheat Value Chain: Implica7ons for Food Security in the Middle East and North Africa
– Egypt Case Study
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