Report: Arab nations should improve grain storage and consider reserves
April 05, 2013 | 04:42 PM
To stabilize their supplies of imported wheat, Arab countries should improve their port and storage facilities and consider strategic grain reserves, according to a World Bank report presented today at the John Hopkins University School of Advanced International Studies agricultural seminar series.
Middle Eastern countries “are going to be huge importers of food no matter what, so they need to manage import risks,” said Michelle Battat of the World Bank’s Middle and North Africa Sustainable Development Department.
She noted that Arab countries are the largest net importers of cereal calories in the world, importing roughly 56 percent of the cereal calories they consume. Given the limited resources of water and arable land in the Arab countries, wheat imports may rise by almost 75 percent over the next 30 years, she added.
The bank study, “The Grain Chain: Food Security and Managing Wheat Imports in Arab Countries,” completed in 2012, found great inefficiencies in many Arab ports and the ways that Arab countries store grain compared with the Netherlands and South Korea, which are other large wheat importers.
The study covered 10 countries: Bahrain, Egypt, Jordan, Lebanaon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia and Yemen. Even though those countries vary in wealth from the oil states to very poor countries, the study said that all could benefit from an improved wheat-import supply chain, which the bank calls WISC.
Among the WISC problems were port facilities, slows customs service and inefficient transportation from the ports to the mills.
In its study, the bank suggested that the countries consider:
In addition, the food price shocks of 2007-08 and 2010-11 also raised questions about the reliability of the food supply in the Arab countries. To address those issues, the study said the countries should consider financial hedging and establishing grain reserves under which they would keep grain in storage and release it when prices go high rather than continue to buy at high prices on world markets.
But Battat noted that the grain reserves are difficult to manage because countries would have to decide at what price to use the reserve stocks and when to replenish them. She also said that a country would need to consider whether spending money on reserves is worth it compared with a country’s other needs.
“For every dollar spent managing strategic reserves, there is one less dollar to invest in other key areas such as education and health,” she said.
Battat also noted that the bank only provides options, and leaves the decisions about any actions to take up to the countries. She said bank officials have made more detailed presentations to the countries on the report’s proposals and received positive reactions.
Agriculture Department officials who were present in the audience noted that the United States found it difficult to manage reserves, and that they interfere with market incentives.
Battat noted that the issue of market incentives is not so great in the Arab countries because the climate prevents large-scale increases in production.
She said the study did not cover the issue of Arab countries countries buying or leasing land in Africa for growing crops.
Arab countries include all members of the League of Arab States: Algeria, Bahrain, Comoros, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanaon, Libya, Mauritania, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, the United Arab Emirates and Yemen.
Middle Eastern countries “are going to be huge importers of food no matter what, so they need to manage import risks,” said Michelle Battat of the World Bank’s Middle and North Africa Sustainable Development Department.
She noted that Arab countries are the largest net importers of cereal calories in the world, importing roughly 56 percent of the cereal calories they consume. Given the limited resources of water and arable land in the Arab countries, wheat imports may rise by almost 75 percent over the next 30 years, she added.
The bank study, “The Grain Chain: Food Security and Managing Wheat Imports in Arab Countries,” completed in 2012, found great inefficiencies in many Arab ports and the ways that Arab countries store grain compared with the Netherlands and South Korea, which are other large wheat importers.
The study covered 10 countries: Bahrain, Egypt, Jordan, Lebanaon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia and Yemen. Even though those countries vary in wealth from the oil states to very poor countries, the study said that all could benefit from an improved wheat-import supply chain, which the bank calls WISC.
Among the WISC problems were port facilities, slows customs service and inefficient transportation from the ports to the mills.
In its study, the bank suggested that the countries consider:
- A regional hub and spoke model under which wheat might be delivered to one country and then divided up for shipment to other countries in the region.
- A parcel service model under which countries should share a vessel.
In addition, the food price shocks of 2007-08 and 2010-11 also raised questions about the reliability of the food supply in the Arab countries. To address those issues, the study said the countries should consider financial hedging and establishing grain reserves under which they would keep grain in storage and release it when prices go high rather than continue to buy at high prices on world markets.
But Battat noted that the grain reserves are difficult to manage because countries would have to decide at what price to use the reserve stocks and when to replenish them. She also said that a country would need to consider whether spending money on reserves is worth it compared with a country’s other needs.
“For every dollar spent managing strategic reserves, there is one less dollar to invest in other key areas such as education and health,” she said.
Battat also noted that the bank only provides options, and leaves the decisions about any actions to take up to the countries. She said bank officials have made more detailed presentations to the countries on the report’s proposals and received positive reactions.
Agriculture Department officials who were present in the audience noted that the United States found it difficult to manage reserves, and that they interfere with market incentives.
Battat noted that the issue of market incentives is not so great in the Arab countries because the climate prevents large-scale increases in production.
She said the study did not cover the issue of Arab countries countries buying or leasing land in Africa for growing crops.
Arab countries include all members of the League of Arab States: Algeria, Bahrain, Comoros, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanaon, Libya, Mauritania, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, the United Arab Emirates and Yemen.
