Duke CGGC researchers gave this overview of food security in the wheat industry with implications for the MENA region and Russia. This is part of an ongoing stream of research with the Minerva Initiative.

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