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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
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• 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
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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
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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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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
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Dependency on Russian Trade
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Climate Policy Poli?cal Tension
Stability MENA
Commonwealth of Independent States
Ukraine, Bal?c countries
Russian Wheat Policy Timeline
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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
Russian Wheat Value Chain
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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
Leading exporters of grains in Russia
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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
Wheat export ports
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Glencore, Kernerl Group of Ukraine & others
United Grain Co. (50%), Summa Group
Outspan Interna?onal
Source: Forthcoming Ahmed et al, 2015
What is the impact of Russia’s economic downturn on the
wheat chain?
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Economic Sanc?ons
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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
Oil Prices Dropped
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The Ruble Dropped
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Infla?on remains elevated in Russia
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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
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