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Shi$ing	
  Governance	
  Structures	
  in	
  the	
  
Wheat	
  Value	
  Chain:	
  	
  
Implica:ons	
  for	
  Food	
  Securi...
Outline	
  
•  Project	
  overview	
  
•  Approach	
  
•  Wheat	
  Industry	
  GVC	
  
•  Wheat	
  Trade	
  and	
  Chain	
...
•  GVC	
  lens	
  to	
  unpack	
  food	
  security	
  in	
  MENA	
  
•  Focus	
  on	
  wheat	
  
•  Country-­‐level	
  cas...
Top	
  down	
  –	
  the	
  global	
  economy	
  with	
  a	
  focus	
  on	
  lead	
  firms	
  
and	
  inter-­‐firm	
  network...
Impact	
  of	
  Food	
  Price	
  Increases	
  on	
  Trade	
  
Balance	
  (2007-­‐2008)	
  
5	
  
Inputs
Biotechnology
Equipment
Land
Water Weighting
Grading
Blending
Elevators
Feed Mills Livestock GVCs
Food service
Bake...
7	
  
ADM	
  
Bunge	
  
Cargill	
  
Louis	
  Dreyfus	
  
Glencore	
  
Input	
  
Suppliers	
  
Grain	
  
Farms	
  
Grain	
 ...
Key	
  Variables	
  in	
  MENA’s	
  Wheat	
  VC	
  
Governance	
  
8	
  
Complexity	
  
Codifiability	
  of	
  
Informa:on	...
Key	
  Events	
  that	
  Influenced	
  Wheat	
  Trade	
  
9	
  
Source:	
  CGGC	
  based	
  on	
  literature	
  review	
  
10	
  
State	
  monopolies	
  control	
  trade	
  
Transforma:on	
  in	
  the	
  VC	
  	
  
Growth	
  in	
  TNCs	
  
Dereg...
1970s	
   1980s	
   1990s	
   2007	
  onwards	
  2000s	
  
Self-­‐Sufficiency	
  Strategy	
  	
   Import-­‐Based	
  Strategy...
1970s	
  and	
  prior	
   1980s	
   1990s	
   2012	
  onwards	
  
•  Increase	
  in	
  government	
  control	
  
•  Crea:o...
Mills
Production Processing Consumption
Storage
Inland Silos moved
to Ports
Mills Bakeries
Production Processing Consumpti...
Shifts in the
Wheat GVC –
From an Old
Model to a New
Model Globaliza:on	
  –	
  High	
  dependence	
  on	
  TNC	
  
Market...
Conclusion	
  
•  Five	
  TNCs	
  account	
  for	
  over	
  70	
  percent	
  of	
  global	
  
grain	
  trade	
  	
  
•  Gl...
16	
  
Thank	
  You!	
  
Ques:ons?	
  
Ghada	
  Ahmed	
  
Ghada.ahmed@duke.edu	
  
Annex	
  
17	
  
The	
  Grain	
  Price	
  Hikes	
  
Source:	
  World	
  Bank,	
  2011	
  
18	
  
SOURCE:	
  FAO,	
  total	
  tonnage	
  of	
  
wheat	
  exported	
  
Algeria	
  	
  
	
  has	
  imported	
  
16.6%	
  
of	
...
Wheat	
  Value	
  Chain	
  
Inputs
Biotechnology
Equipment
Land
Water Weighting
Grading
Blending
Elevators
Feed Mills Live...
Company
Revenues
(Billion USD)
Assets
(Billion
USD)
Company Operations
Segments
Glencore Xstra
$232.69 $154.93
Metal and M...
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Shifting Governance Structures in the Wheat Value Chain Implications for Food Security in the Middle East and North Africa

A research team from the Duke University Center on Globalization, Governance & Competitiveness presented on Global Value Chains and trade policies for food and nutrition at a security workshop in Rome on September 26, 2014.

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Shifting Governance Structures in the Wheat Value Chain Implications for Food Security in the Middle East and North Africa

  1. 1. Shi$ing  Governance  Structures  in  the   Wheat  Value  Chain:     Implica:ons  for  Food  Security  in  the  Middle   East  and  North  Africa     Ghada  Ahmed,  Danny  Hamrick  &  Gary  Gereffi   Center  on  Globaliza:on,  Governance  &  Compe::veness   Duke  University     Global  Value  Chains  and  Trade  Policies  for  Food  and  Nutri:on  Security  Workshop    Rome   September  26  2014    
  2. 2. Outline   •  Project  overview   •  Approach   •  Wheat  Industry  GVC   •  Wheat  Trade  and  Chain  Governance   •  MENA’s  wheat  GVC  &  Country  Cases   •  Implica:ons  for  MENA   •  Conclusion   2  
  3. 3. •  GVC  lens  to  unpack  food  security  in  MENA   •  Focus  on  wheat   •  Country-­‐level  case  studies:  Egypt,  Iran,  Saudi  Arabia,   Syria,  United  Arab  Emirates,  and  Algeria   •  Compara:ve  analysis  of  wheat  GVCs  and  food  security   strategies     •  GOAL:    Use  GVC  framework  to  analyze  MENA   vulnerabili:es  &  design  more  resilient  food  security   strategies  at  the  regional  level   3   The  Project    
  4. 4. Top  down  –  the  global  economy  with  a  focus  on  lead  firms   and  inter-­‐firm  networks,  using  varied  typologies  of  industrial   “governance”       BoMom  up  –  a  focus  on  countries  and  regions,  which   are  analyzed  in  terms  of  various  trajectories  of   economic  and  social  “upgrading”  or  “downgrading”   4   Approach  
  5. 5. Impact  of  Food  Price  Increases  on  Trade   Balance  (2007-­‐2008)   5  
  6. 6. Inputs Biotechnology Equipment Land Water Weighting Grading Blending Elevators Feed Mills Livestock GVCs Food service Bakeries Retailers Production Processing Marketing Commodity traders Domestic International Mills Milling Packaging Storage Soft wheat Hard wheat Durum wheat Farms Food manufacturers Enabling Environment Public governance Infrastructure Financial networks Private governance Logistics networks Consulting services Labor Trade 6   Constraints  in  MENA   Source:  Ahmed  et  al  ,  2012    
  7. 7. 7   ADM   Bunge   Cargill   Louis  Dreyfus   Glencore   Input   Suppliers   Grain   Farms   Grain   Traders   Bulk   Grain   Buyers   Grain   Millers   Processors   Grain   Facili:es,   logis:cs  &   Terminals     Financial  Services   e.g.  credit,  futures,   deriva:ves     70-­‐90%  of  grains  traded   interna:onally  are   managed  by  the  ABCDs   The  ABCDs  of  the  Grain  Market     Source:  CGGC  based  on  company  reports  &  literature  review  
  8. 8. Key  Variables  in  MENA’s  Wheat  VC   Governance   8   Complexity   Codifiability  of   Informa:on   Capability     TNCs   MENA   Government   Agencies   •  Complex  Network   •  Informa:on  &   Technology   Intensive   •  Economies  of   Scale   strong weak Global  traders  drive   the  flow  of  wheat  &   are  involved  in  most  of   the  VC     Governments  influence   segments  of  the  chain   through  grain   standards,  subsidies,   marke:ng  and  trade.    
  9. 9. Key  Events  that  Influenced  Wheat  Trade   9   Source:  CGGC  based  on  literature  review  
  10. 10. 10   State  monopolies  control  trade   Transforma:on  in  the  VC     Growth  in  TNCs   Deregula:on   Consolida:on   Globaliza:on   Financializa:on   Trade  liberaliza:on,  deregula:on  &   priva:za:on  of  wheat  boards     Started  in  agrochemicals  around   1960s  to  improve  output     Accelerated  by  mid-­‐2000s     TNCs  acquire  input  suppliers,  small  and   large  players  in  grain  infrastructure     TNCs  opened  overseas  offices  &     invested  in  mills  and  elevators     TNCs  invest  in  overseas  assets,     export  facili:es,  partnerships,   technology  and  data  analy:cs     TNCs  use  forward  future  contracts  &   hedging  to  manage  risk   TNCs  finance  investments  through   public  offerings,  expand  risk   management  &  financial  opera:ons   From  an  Old  Model  to  a  New  Model    
  11. 11. 1970s   1980s   1990s   2007  onwards  2000s   Self-­‐Sufficiency  Strategy     Import-­‐Based  Strategy   •  Targe:ng  self  sufficiency   •  Achieved  self  sufficiency     •  Increased  tariffs  on  wheat  &flour   imports  (100%)   •  Subsidies  peaked  to  $3  billion   •  Reduced  wheat  subsidies     •  Introduced  wheat  produc:on  quotas   •  Reduced  import  wheat    tariffs   •  Started  phasing  wheat  produc:on  &  incen:ves   •  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,  Sheoy,  2004,  Al  Maoery,  2009   Saudi  Arabia’s  Wheat  Policy  Timeline     11  
  12. 12. 1970s  and  prior   1980s   1990s   2012  onwards   •  Increase  in  government  control   •  Crea:on  of  PBDAC  to  help  supply   farmers  with  inputs   •  Gradual  easing  of  government   control  in  land  use  &  sales     •  1989-­‐Last  increase  in  the  cost  of   subsidized  bread     •  Wheat  price  increases  and  stagnate  cooon  prices   •  Bread,  food,  and  social  jus:ce  protests   •  Overthrow  of  Mubarak  government     •  Elimina:on  of  subsidized  fino   flour     •  Easing  of  import  restric:ons   for  fino     •  1996-­‐  Producers  of  fino  flour   and  bread  required  to  use   imported  wheat  &  shami  flour   subsidy  eliminated   2000s   •  Policies  target  expansion   of  storage     •  Increase  domes:c   produciton   •  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     12  
  13. 13. 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 13  
  14. 14. Shifts in the Wheat GVC – From an Old Model to a New Model Globaliza:on  –  High  dependence  on  TNC   Market  Failure  Risk   Consolida:ons  -­‐  Traders  are  an  oligopoly   interac:ng  with  state  monopolies   Market  Failure  Risk       Deregula:on  –  State  plays  a  key  role   Government  Failure  Risk     Transforma:on  in  the  VC   Poten:al  Impacts  on  MENA’s  Food  Security     Financializa:on  –  Increased  food  price   vola:lity   Market  Failure  Risk   14   strong weak
  15. 15. Conclusion   •  Five  TNCs  account  for  over  70  percent  of  global   grain  trade     •  Globally,  TNCS  have  seen  an  increase  in  power   while  na:onal  governments  have  a  diminishing   role  in  wheat  trade   •  MENA  is  a  convergence  region  where  state-­‐ dominated  old  world  models  and  TNC-­‐led  new   world  models  meet,  crea:ng  unique  challenges   •  Need  for  collabora:on,  transparency,  and  private   sector  par:cipa:on  to  meet  food  security  needs   15  
  16. 16. 16   Thank  You!   Ques:ons?   Ghada  Ahmed   Ghada.ahmed@duke.edu  
  17. 17. Annex   17  
  18. 18. The  Grain  Price  Hikes   Source:  World  Bank,  2011   18  
  19. 19. 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  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   19   MENA’s  Leading  Sources  of  Wheat  
  20. 20. Wheat  Value  Chain   Inputs Biotechnology Equipment Land Water Weighting Grading Blending Elevators Feed Mills Livestock GVCs Food service Bakeries Retailers Production Processing Marketing Commodity traders Domestic International Mills Milling Packaging Storage Soft wheat Hard wheat Durum wheat Farms Food manufacturers Enabling Environment Public governance Infrastructure Financial networks Private governance Logistics networks Consulting services Labor Trade 20   Wheat  Value  Chain   Source:  Ahmed  et  al  ,  2012    
  21. 21. Company Revenues (Billion USD) Assets (Billion USD) Company Operations Segments Glencore Xstra $232.69 $154.93 Metal and Minerals, Energy Products, Agriculture Products Cargill* $136.65 $59.88 Origination and Processing, Food ingredients and applications, Agriculture services, Risk management, Finance Archer Daniels Midlands (ADM) $89.80 $43.75 Oilseed Processing, Corn Processing, Agriculture Services, Finance Louis Dreyfus Commodities* $63.59 $19.17 Proteins, Tropicals, Other Products Bunge Limited $61.34 $26.78 Agribusiness, Sugar and Bioenergy, Food and Ingredients, Fertilizer ! Lead  Firms   21   Source:  CGGC  based  on  company  2013  annual  reports  

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