Session IV will analyze the key findings from AKADEMIYA2063's analysis of global market disruptions in the wheat sector & the exposure & contagion effects on agricultural productivity & growth. The speaker will give an overview of the level of exposure of African countries to global trade in wheat & examine the effects of the disruption of global wheat prices on gross incomes, general food price inflation & food consumption levels.

1. Wheat Sector Disruptions: Exposure, Contagion, and
Effects on Income and Food Security
Leysa Maty SALL
Senior Associate Scientist
AKADEMIYA2063

2. Outline
Introduction
1. Exposure and vulnerability of African countries
2. Simulation scenarios
3. Effects on households' incomes
4. Effects on food inflation
5. Impact on food consumption
Conclusion

3. Introduction

4. Global wheat price trends
• The Russia-Ukraine conflict raises numerous concerns about global trade in grain as Russia and
Ukraine are major exporters of wheat, corn, and other food staples worldwide.
• Wheat occupies a relatively small place in the agricultural sector of African countries, as of 2019,
almost 60% of African countries (30 countries) imported wheat products directly from Ukraine and
Russia.

5. The prices of wheat and corn increased by
more than 40% between February and May
2022 .
On May 20, 2022, the price reached an all-
time high of US $560 per metric ton (India
imposed an embargo on wheat exports in
May )
Since May 2022, average monthly prices
decreased from US $520 to around US $380
per ton on August (In the third quarter,
commercial exports from Ukraine’s Black
Sea ports have resumed).
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INTERNATIONAL PRICES, Export, US (Gulf), Wheat (US No, 2, Hard Red Winter), US Dollar/tonne
Commodity Code: CMM100108
Global wheat price trends
Figure 1: : Weekly wheat export prices, US market, US Dollar/tonne
Source: Food and Agriculture Organization [FAO], 2022, Food Monitoring Price Analysis tool.

6. Objectives
• Gross incomes
• General food price inflation
• Food consumption levels.
• Group 1: 4 countries disaggregated into Urban and Rural households: Kenya, Nigeria,
Senegal and Tanzania.
➺Exposure and vulnerability to wheat market disruptions
➺Analyze the effects of the disruption of global wheat prices
• Group 2: 4 countries disaggregated into Urban, rural farm and rural non-farm households:
Ghana, Mozambique, Malawi and Uganda.
⇊

7. 1. Exposure andvulnerabilityto wheat market
disruptions

8. Direct Exposure of African Countries to
Wheat Import from Ukraine and Russia
Figure 2: Dependency on wheat imports from Crisis region (Share in
country imports), Percentage
 Most African countries (41) rely on imports to satisfy their
domestic needs for wheat.
 10 African countries are highly exposed due to high dependence
on wheat imports from Ukraine and Russia.
 10 African countries have considerable exposure with
substantial wheat imports from Ukraine and Russia (share of the
two countries in total imports of wheat over 25 and 50 percent).
 14 countries have an average exposure with the share of wheat
imports from Ukraine and Russia of less than 25 percent.
Source: FAO Food Balance Sheet (2022)

9. Indirect exposure through high import
penetrationandintra-regional re-exports
 Many African countries (23) import more wheat than
their domestic consumption needs: issue of
recontamination.
 Countries can be exposed to the crisis, not through
involvement in global markets, but through re-exports by
their neighbors.
Source: FAO Food Balance Sheet (2022)
Figure 3: Wheat Import Penetration (Import/domestic
Consumption), Percentage

10. Contaminationthrough regional re-exports
Source: Calculations from AATM 2022 database.
 Many African countries re-export wheat to their
neighbors, as shown above, exposing the latter
indirectly to shocks in global markets.
 The network of re-exports is particularly dense in
West Africa.
Figure 4: Intra-regional wheat re-export flows (Million USD)

11. Contaminationthrough regional re-exports
Source: Calculations from AATM 2022 database.
Many African countries re-export wheat to
their neighbors, as shown above, exposing
the latter indirectly to shocks in global
markets.
The network of re-exports is particularly
dense in West Africa.
Figure 5: Intra-regional wheat re-export flows in West Africa (Millions of USD)

12. 2. Simulationscenarios

13. Two scenarios basedonChanges inthe international w
heat price
“Baseline” scenario: no major changes in
the economies’ trajectories in the absence
of the crisis for the period 2022-2024.
Price forecasts for the year 2021, 2022, 2023
and 2024 in October 2021 (before the crisis)
World Bank’s commodity price estimates before and after the start of the crisis are compared,
“Ukraine” scenario: Disruptions from the
changes in wheat commodity markets after
the during the crisis for the period 2022-
2024.
Price forecasts for the year 2021, 2022, 2023
and 2024 in April 2022 (After the crisis)

14.  Global wheat prices are expected to jump by
more than 40 percent in 2022.
 Prices are expected to start to decrease in 2023
but will still be around 25 percent higher in 2024
than in the pre-war period.
Two scenarios:
Figure 6: Changes in International Price of Wheat, US HRW*, Percentage Annual
Changes

15. 3. The effects of rising wheat prices onhouseholds'
incomes

16. Effects onhouseholds'incomes
16
Rural Households KENYA Urban Households
NIGERIA
Rural Households SENEGAL Urban Households
Rural Households
TANZANIA
Urban Households
• Reduction in gross incomes in rural and urban areas and is weakest among Nigerian and strongest among Senegalese households.
• Richest households are the most affected: Incomes among the top two quintiles tend to decline more in Kenya, rural Senegal and Tanzania
• In Nigeria, urban households in the second richest 20% - tend to earn a higher share of incomes from activities in the cereal processing sector
Group 1:
Figure 7: Change in Gross Income vs Baseline (%)

17. Effects onhouseholds'incomes
17
• Lowest income effect is observed among rural non-farm and urban households in Ghana and rural farm households in Uganda.
• Strongest income effects are observed in Mozambique across all rural and urban households.
Group 2:
GHANA
Rural
Farm
Households
Rural
Non-Farm
Households
Urban
Households
MOZAMBIQUE UGANDA MALAWI
Figure 8: Change in Gross Income vs Baseline (%)

18. Effects onhouseholds'incomes
For both groups:
• Effect on household incomes hold through 2024 and tends to increase in all countries as wheat prices
remain high, and producers and consumers adjust to changes throughout the economy.
• Incomes start to recover by 2024 are among rural non-farm households in Malawi and rural farm
households in Uganda.
• Generalized decrease in incomes  Effect of rising global wheat prices is therefore equivalent to a tax on incomes
• Size of the wheat processing industries in the respective economies and the share of wheat products in household
expenditures  Different impact at household level.

19. 4. The effects ofglobal wheat price increases onfood
inflation

20. Effects onfoodinflation
Rural Households KENYA Urban Households
NIGERIA
Rural Households SENEGAL Urban Households
Rural Households
TANZANIA
Urban Households
Rural Households Urban Households
Figure 9: Changes in Food Price Index vs Baseline (%)
• Prices remain stable at high levels in 2024 in Kenya while continuing to rise in Senegal and Nigeria.
• Tanzania is the only in this group who sees prices falling back to their pre-crisis levels, except for the highest income urban
households.

21. Effects onfoodinflation
21
GHANA
Rural
Farm
Households
Rural
Non-Farm
Households
Urban
Households
MOZAMBIQUE UGANDA MALAWI
Figure 10: Changes in Food Price Index vs Baseline (%)
• Ghana, Malawi and Uganda all show a sharper increase in food prices for the lower income households in rural areas, for
both farm and non-farm households.
• Mozambique and Tanzania are the two countries where prices tend to fall back to prewar levels in 2024.

22. 5. The effects ofglobal wheat price increases onfood
consumption

23. Effects onfoodconsumption
23
Kenyan households among all categories experience the
highest drop in food consumption, more than 1.5
percent
Rural Households KENYA Urban Households
NIGERIA
Rural Households SENEGAL Urban Households
Rural Households
TANZANIA
Urban Households
Rural Households Urban Households
Figure 11 : Changes in Food Consumption vs Baseline (%)
• Kenyan households among all categories experience the highest drop in food consumption (around 1.5 percent)
• Nigeria shows the lowest decline in food consumption levels, less than 0.15 percent.
• Rural households in Senegal face a relatively stronger decline in food consumption compared to their urban. neighbors.

24. Effects onfoodconsumption
24
• Strong decline in food consumption in Ghana and Mozambique.
• In Uganda and Malawi, food consumption decreases more among non-farm rural households compared to farm households.
• Food consumption levels are shown to recover more by 2024 in rural areas of Mozambique and Malawi compared to urban areas.
GHANA
Rural
Farm
Households
Rural
Non-Farm
Households
Urban
Households
MOZAMBIQUE UGANDA MALAWI
Figure 12: Changes in Food Consumption vs Baseline (%)

25. Conclusion

26. Conclusion
Exposure and vulnerability Re-export activity and Regional Contagion
Policy implications:
☛ Urgent measures need to be adopted to
dampen the effects on consumer prices
for wheat products.
☛ it is important to anticipate some degree
of transmission to prices of local staples
as consumers gradually turn to them in
the near term as substitutes for wheat
products.
Policy implications:
☛ Neighboring countries need to coordinate
responses to the crisis or at least allow
cross-border trade to continue without
major disruptions. The more borders
remain open, the wider the shocks spread,
allowing them to be absorbed over a
larger market area and become less
intense.

27. Conclusion
Income, Inflation and Food Security Effects of Wheat Trade Disruptions
•Effect of rising global wheat prices is therefore equivalent to a tax on incomes
•Size of the wheat processing industries in the respective economies and the share of wheat products
in household expenditures  Different impact at household level.
•Higher wheat prices will have a significant impact on rising food prices and reduce living standards.
•Policy implications: Lower-income households need to be protected from the inflationary pressures arising
from higher global wheat prices and the expected effects on food consumption.

28. THANK YOU