Global Value Chain Analysis of Food Security and Food Staples for Major Energy- Exporting Nations in the Middle East and North Africa: Russia Focus

1. 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 1

2. •  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 2

3. 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 3

4. 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 4

5. 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 5

6. Dependency on Russian Trade 6 Climate Policy Poli?cal Tension Stability MENA Commonwealth of Independent States Ukraine, Bal?c countries

7. Russian Wheat Policy Timeline 7 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

8. Russian Wheat Value Chain 8 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

9. Leading exporters of grains in Russia 9 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

10. Wheat export ports 10 Glencore, Kernerl Group of Ukraine & others United Grain Co. (50%), Summa Group Outspan Interna?onal Source: Forthcoming Ahmed et al, 2015

11. What is the impact of Russia’s economic downturn on the wheat chain? 11

12. Economic Sanc?ons 12 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

13. Oil Prices Dropped 13

14. The Ruble Dropped 14

15. Inﬂa?on remains elevated in Russia 15

16. 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 16

17. THANK YOU! QUESTIONS? Ghada Ahmed Ghada.ahmed@duke.edu 17

Global Value Chain Analysis of Food Security and Food Staples for Major Energy- Exporting Nations in the Middle East and North Africa: Russia Focus

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