Duke MINERVA

Global value chain (GVC) analysis provides both conceptual and methodological tools for understanding global, regional, and local economies. GVC analysis uses a top-down approach to study how global lead firms govern trade, as well as a bottom-up approach that focuses on how local institutions shape development trajectories at the local, national, and regional level. This study uses the GVC framework to understand:

• The input-output structure of the global wheat industry (industrial organization)
• How the wheat GVC operates in the Middle East and North African (MENA) countries
• The key value chain challenges, practices, and policies for maintaining a stable and affordable wheat supply in case study countries
• The governance dynamics and key trends in the wheat value chain globally and in MENA countries

Wheat GVC

Key Findings on global wheat value chains and MENA

• Five major firms dominate global wheat trading.  Five firms, based in the global north, control 90% of wheat traded internationally. These firms are able to use their size to broker deals that allow for immense profits, even during global food shortages like the 2007-2008 global food crisis.
• The MENA region uses a variety of approaches to achieve food security.  Countries in the region are utilizing several approaches to address food security challenges. The United Arab Emirates (UAE) and Saudi Arabia capitalize on oil resources to secure food through trade and invest in offshore production. Others, such as Egypt, Syria, and Iran, seek to increase domestic production to reduce dependency on imports, and the drain on foreign reserves.
• Several issues cut across the cases.  Environmental distress, particularly water shortage, constrains domestic production. The role of the government is high in controlling the movement of wheat along the chain and in regulating the cost of bread. Countries are upgrading their storage capacity to mitigate changes in supply.
• Institutional legacies are very strong in all countries.  This includes government monopolies, subsidies and price controls. It is quite difficult to change subsidy systems and attempts to do so are usually met with civil unrest.
• Countries are diversifying their supply base.  Saudi Arabia, UAE, and Egypt (to a lesser extent) are investing in offshore production. However, these projects are in early stages of implementation. There are a number of concerns about these projects, such as low farming skills and underdeveloped infrastructure in host countries.

Wheat represents about 37% of caloric consumption in the MENA region. The region is collectively a net importer of 58 million metric tons of cereal, making it the largest net importing region in the world (Wright and Cafiero 2010). Wheat is a strategic commodity in the region with most governments using direct protection instruments to safeguard local production. The political economy and social dynamics in MENA countries play a major role in how the populations view the increasing dependence on wheat imports and access to bread. The GVC framework sheds light on the interdependencies between global trade and local access to wheat and wheat products . In doing so, the GVC framework can contribute to new understandings of food security that incorporate the complex dynamics of global trade, geopolitics, finance markets and structures, and local institutions.

The global wheat industry represents an important commodity both in terms of food security and in the development of other goods, including animal feed and high-value food products. Despite its importance, less than 25% of annual wheat production is traded across borders, the remainder being utilized domestically (Murphy, Burch et al. 2012, FAO 2013). However, imported wheat remains crucial for several regions, such as the MENA, which depend on imports to meet regional demand (Sadler and Magnan 2011). The wheat trade is characterized by a decline in bulk trade, despite its continued importance in select regions and increasingly volatile price fluctuations.  The five multinational grain trading companies are highly diversified in other agricultural commodities, technologies, and financial instruments.

MENA Country Typology and Level of Food Insecurity

For more information about the wheat value chain, see our most recent report on the Reports & Updates page.