The impact of the Russian-Ukrainian war on Algeria: Towards a more sustainable and resilient food system

4 March 2023

Introduction

The global COVID – 19 pandemic in 2020 has spurred the crisis in commodity markets that began in 2019. The disruption of the distribution and transportation chain, in conjunction with subsequent protectionist trade measures by producing countries, led to a rise in agricultural commodity prices. This price inflation, further intensified by the Russian-Ukrainian war, has severely affected the food security of the poorest countries, particularly in sub-Saharan Africa, Ethiopia, Eritrea and Somalia.

What impacts did this war have on the Algerian food system, its sustainability and/or resilience?

Before answering this question, we will briefly outline the specificities of Algerian agriculture and the state of its food security.

The specificities of Algerian agriculture

Agriculture holds an important position in the Algerian national economy, as well as in the development of its rural areas, accounting for a slightly more than 12% of the GDP excluding hydrocarbons, providing more than 20% of the active population, and generating 70% of the value of the national food consumption. The agricultural sector is still central to the development of rural areas. An estimated 11.5 million people continue to live in Algerian rural areas following the massive migration caused by extreme insecurity in the 1990s. This population, most of whom are under the age of 30, is constituted by agricultural households, which account for about 40% of this rural population.

Algeria’s total agricultural land is estimated at more than 8.5 million hectares, of which 15% is irrigated. The “cereal/rest land” system represents more than three quarters of the agricultural land and still ensures about 60% of the agricultural exploitation. The major innovation in recent years has been the development of large-scale desert agriculture, which has been supervised for the past two years by the Office for the Development of Industrial Agriculture in the Sahara (Office de Développement de l’Agriculture industrielle en terres Sahariennes ODAS). Livestock farming relies on nearly 30 million heads of sheep and goats, as well as a herd of cows producing meat and milk for the local market.

In dry areas, the scarcity of resources, structural constraints (predominance of less than 19 hectares farms) and the fragility of ecosystems (steppes, oases, mountains) are incompatible with the technical generalization of the industrial (or productive) system, which is considered to be one of the main orientations of the official agricultural policy.

Due to failure to meet the growing food demand with the national supply of basic products i.e. wheat, milk, sugar and edible oils, accounting for most of the food consumption of Algerians, it has become crucial to have recourse to imports to cover the country’s food needs. Algeria’s food bill has been steadily increasing over the past decades, and it is now the largest importer of food in Africa, with about 75% of basic food needs covered by imports. Algeria’s failure to produce the two main foodstuffs, cereals and milk, is attributable to its agro-climatic conditions (most of Algeria’s agricultural land is located in arid and semi-arid regions), the scarcity of arable land, its low natural fertility and the lack of water resources. It also stems from inappropriate political and technical choices.

The approaches adopted have neglected the upper arid plains based on rain-fed agriculture, where field crops (including cereals) are widespread. Large-scale irrigated agriculture has been encouraged in the desert areas. However, this last choice is based on the overexploitation of non-renewable groundwater resources on the one hand, and on public and private capital whose profitability has not been achieved, given the high production costs in these areas and the market prices that do not correspond to the incomes of lower classes.

What is the state of food security in Algeria today?

From the outset, we must state that the Algerian population has not experienced any conditions of food insecurity. The national agricultural supply has been systematically and effectively supported by imports to cater for the population’ needs. Food subsidies for basic products (bread, pasta, couscous, sugar, and oils) have been crucial in covering food needs, and the disturbances in supply cycles experienced since the beginning of the health crisis (shortages of semolina, sugar, and edible oils in the spring of 2020) have not altered the state’s ability to guarantee people’ access to strategic products. A look at the data published by international organizations on the prevalence of undernutrition (the Food and Agriculture Organization of the United Nations, the World Food Program, the United Nations Children’s Fund, the International Fund for Agricultural Development, and the World Health Organization) clearly indicates the progress achieved by Algeria in terms of food security.

This result indicates that Algeria is now in a comfortable food security situation. The high performance in 2018-2020 is above the global level, or that of countries such as Egypt and Morocco. It is similar to that achieved in high-income Western countries. The caloric share recorded in the period 2017-2019 was 3343 calories per day per person ( United Nations Food and Agriculture Organization, 2020), that is to say, with less than 2.5% undernourished, compared to 8.5% globally, 3% in Tunisia, 4.2% in Morocco and 5.4% in Egypt.

Algeria’s food bill has been steadily increasing over the past decades, and it is now the largest importer of food in Africa

These achievements are attributed to the State’ policy of price subsidies for basic foodstuffs, while improving incomes, living conditions and the well-being of the population over the last 20 years. They are also the result of efforts to reduce poverty and social and territorial inequalities, which, needless to say, are the root causes of food insecurity and malnutrition in all its forms.¹

Even though the improvement in Algerians’ food share has been achieved in part thanks to sustained food purchasing power and to a moderate yet effective growth in agricultural supply, including basic products such as wheat or milk, it remains more reliant on imports: between 1970 and 2010-2017, the share of imports in the composition of the Algerian citizen’s food share rose on average from 38% to 68%²(CREAD, 2017). It has to be noted that wheat (soft and hard) contributes 43% of total calories and 46% of proteins in the average food ration of the Algerian consumer.³

The country’s prevailing approach to food security, largely dependent on subsidies for the benefit of domestic consumers, is equally reflective of the availability of food products acquired on the world market.

Rising food imports, with agricultural trade balance recording a deficit

The failure to meet the growing demand for food by the national supply has made it necessary to import to cover the country’s food needs, making the food bill grow steadily over the past decades.

The main imports are basic products (the two types of wheat, dairy products, sugar, edible oils), which account for the main composition of Algerians’ food diet, and represent on average more than 60% of the food bill. The consumption demand for wheat has increased tenfold between 1966-69 (698,500 tons) and 2000-2005 (6,796,000 tons) to level off at nearly 8 million tons during the 2010 decade. National demand for both types of wheat consumption covers just over 25% of national production, which makes Algeria’s cereal dependence the highest in the North African region, at 72% on average, and also one of the highest in the Mediterranean basin. The average annual quantities of cereals imported during the last six trade years ⁴ amounted to over 123 million quintals. The deficit mainly relates to soft wheat and maize. The quantities imported between 2014 and 2020 account for more than 86% of imported cereals, including 51% of soft wheat.

Dairy products also display the same trend, with Algeria importing 60% of the country’s milk powder each year.

The value of food imports has increased from an average of 1 billion dollars in 1970 to 2 billion dollars in 1980, to 3 billion dollars in 2003, to an annual average of 4.3 billion dollars in 2006-2010, and doubled in 2011-2015 under the joint effect of rising world prices and imported quantities. In recent years, it has stabilized at an annual rate of about 8.5 billion, with the recent decline in the food bill resulting from lower international prices as well as lower imported quantities (Except for cereals in 2020, whose production reached a record level in 2019).

These imports have created a structural deficit in the agricultural trade balance, with agricultural exports covering barely 5% of the total food imports in 2020. The food import bill has increased in 2021 and 2022 due to a sharp rise in agricultural raw material prices. Obviously, this situation is part of Algeria’s food fragility, which is closely linked to its ability to deal with emerging global food market threats.

An increase in food commodity prices in 2020 that deepened in 2022

This increase in food commodity prices emerged firstly after the COVID-19 health crisis in conjunction with strong interventions by several countries (including China) on these world markets, and secondly after the interruption of cereal supplies from the Black Sea as a consequence of the Russian-Ukrainian war (24 February 2022).

The increase has been recorded on all products imported by Algeria, namely the two types of wheat, barley, corn, dairy products, sugar and edible oils. The economic situation that has been affected by the health crisis will significantly impact food product prices in 2020 and 2021.

Such price escalations, driven by global energy prices, are at the root of the high food bill and agricultural price inflation.

During the 2020-21 trade season, the prevailing market dynamics, with lower than usual harvests in some major producing countries, logistics (transportation) challenges, temporarily reduced exports, and a significant increase in demand for coarse grains by China, have pushed cereal prices to their highest level since 2012-13. World agricultural commodity prices between May 2020 and May 2021 registered the largest increase. In May 2021, prices soared by about 40 percent in a year, reaching their highest levels in September-October 2021, according to the U.N. Food and Agriculture Organization. Corn saw an increase of 88 percent, soybeans 73 percent, wheat and milk 28 percent, and sugar 34 percent.

Prices for soft wheat were around $290 per ton FOB ⁵ in the last quarter of 2021, and durum wheat was around $430 per ton FOB at the end of 2021. Corn was selling at about $240 per ton, and skim milk powder at over $3,500 per ton FOB. This significant price volatility in world wheat markets has led to higher wheat prices imposed on the Algerian Interprofessional Office for Cereals (Office algérien interprofessionnel des céréales – OAIC).

An upward trend in agricultural commodity prices will be further intensified following the Russian-Ukrainian war that broke out on February 24, 2022.

This Office, which since August 2021 has enjoyed a monopoly on the import of cereals ⁶, paid a high price for supplies in September 2021, at a cost of 349.50 dollars per ton CIF. ⁷

An upward trend in agricultural commodity prices will be further intensified following the Russian-Ukrainian war that broke out on February 24, 2022. Since the outbreak of the war, soft wheat prices have increased by 50% to $450 per ton (FOB). World prices for vegetable oils have risen by 23%, sugar by 7% and meat by 5%. This increase was mainly caused by speculative behavior in the markets given that the commercialized wheat was harvested during the previous agricultural season.

Accordingly, Algeria bought 600,000 tons of French soft wheat at 485 dollars per ton (CIF) in March-April 2022 (more than 100 dollars/February 2022). Two consignments of durum wheat were purchased in Mexico with a volume of 500,000 tons at a price of 570 dollars per ton (CIF) and the other one at 590 dollars per ton! That is an unprecedented record. These major procurements were aimed at consolidating the country’s security stocks. It is worth mentioning that prices have declined slightly as a result of the July agreement between Ukraine and Russia, which ensured safe sea crossing for the export of cereals across the Black Sea for 120 days. Despite the fact that the price of soft wheat is at 331 USD per ton (FOB), wheat prices remain high, as they are still strongly marked by the unfolding conflict in Ukraine. Market instability is reflected in price increases in late September and early October to around $350 per ton (FOB).

The geographical distribution of Algerian imports: the EU for soft wheat, the American continent for durum wheat and barley – or how Algeria is evading the geopolitical stakes

Soft wheat import trends over the past five trade seasons indicate that the largest market shares are accounted for by European Union countries (France, Germany, Lithuania and Poland). Though some trade seasons reveal the overwhelming share of France (88% of supplies in 2019-2020), the recent 2020-2021 and 2021-2022 seasons rather indicate a greater diversity in sources of supply as well.

In the last 2020-2021 trade year, France was Algeria’s top supplier of soft wheat, although closely followed by Germany and Poland. In June 2021, Russia sent wheat to Algeria for the first time since 2016. This market penetration of Algeria by Russia has been at the expense of the quantities sent by France.

These supplies of wheat have reduced the acceptance recorded by the Algerian Interprofessional Office for Cereals with respect to the percentage of rotten cereals, with wheat bug infection rate tolerated up to 1% but in exchange for a higher percentage of protein. ⁸

The United States of America and Latin American countries are the primary suppliers of durum wheat. The quantities of barley imported in the 2020-2021 season are evenly distributed among 7 suppliers, of which 3 are the main ones, namely Denmark as the first supplier, closely followed by the United Kingdom and Spain.

Over the last trade season 2021-2022, a total of 10.6 million tons of cereals have been unloaded in Algerian ports. Of this total, the soft wheat was imported from France (24%), Germany (23%), Ukraine (8%), Russia (7%), Poland (7%), Romania (6%) and other countries (9%). Besides, durum wheat was mainly imported from Canada (38%), Mexico (34%) and the United States (17%). The only EU country is Italy (11%).

Barley is imported from Germany (about 50% of imports, with 282,000 tonnes), followed by France (11%), slightly exceeding Lithuania and Latvia. Finally, corn is imported massively from two Latin American countries: Argentina (72%) and Brazil (24%).

Hence, Algeria is only slightly dependent on cereals from the Black Sea (Russia and Ukraine). It is dependent solely on soft wheat, which collectively represents only 15% of the quantities imported. This fact, however, does not mean that Algeria is spared from the geopolitical issues arising in the world markets for basic food products. The excessive prices of these products are reflected in the total food bill and, to date, there is no indication that the country can acquire these products at no political cost if the Ukrainian conflict continues. ⁹

Measures undertaken by public authorities to secure food for citizens and increase domestic production

The advent of the COVID-19 pandemic in Algeria, as well as its resulting disruption of the distribution and supply logistics chain, signaled the measures to be taken by the public authorities to address the issue of citizens’ food supply. In response to the sudden impact of the pandemic, the government has doubled its procurement in the food markets in order to build up food stocks (cereals, milk powder and edible oils) and to grant financial and food aid to families.¹⁰

The ongoing market crisis caused by the conflict in Ukraine will lead the Algerian government to restructure food stocks through massive purchases of grain, milk powder and other agricultural raw materials. Public authorities feel safe about the state of stocks (8 to 9 months worth of consumption of both types of wheat) and food subsidy guarantees are still in place. The removal of food subsidies, which was under discussion a few months ago, has now been removed from the authorities’ political agenda. The state has not only postponed the reform of the food subsidy system, but has also recently raised subsidies on pasta prices, whose price has remained unchanged. It has also sought to keep the price of bread stable (unchanged since 1989) by granting tax deductions to the bakery sector on its sales, and has reduced duties on bakeries’ equipment to silence their claims about bread prices.

The State is also trying to leverage production. In this respect, it has increased the prices paid to cereal producers ¹¹, and has continued to subsidize the price of fertilizer (50% of the subsidized price since October 2022). The State has again authorized the import of high-yield dairy cows since December 2021 in order to increase the production of soft milk, and has liberalized the speed of agricultural equipment imports for the benefit of agricultural investors. Moreover, it is worth noting that the government is encouraging agricultural investments in desert areas for the development of strategic crops (cereals, animal feed, rapeseed, sugar beet and corn). The Office for the Development of Industrial Agriculture has also developed investment zones in some southern areas and granted land concessions to investors. ¹²

Indeed, Agricultural policy measures stress agricultural growth achieved primarily through intensive (even mining) utilization of natural resources (water and land). Heavy public investment is spent on the application of a technical model that consumes a lot of chemical inputs and machinery, most of which is imported. This leaves the fate of agriculture and the country’s food security in the hands of a segment of agricultural entrepreneurs who are seldom worried about the ongoing climate change. This entrepreneurial class originating from business circles, which also comprises local political system clients or large landowners, competes with peasant families for real estate resources, public subsidies and technical support from the state. In fact, the current agricultural trends are ignoring the real food sovereignty of the country

Towards food sovereignty in Algeria: Which lessons to draw from these economic and political crises?

The future of global agricultural commodity markets is highly uncertain, as containment of the volatile character since 2012 has been particularly driven by world records in cereal production, but maintaining this condition is uncertain amidst an era of conflicts involving major commodity producing zones. “What is sure is that food prices will get more volatile than in the past,” as noted by analysts at a European think tank specializing in global agricultural markets. ¹³ The UN Food and Agriculture Organization and the Organization for Economic Cooperation and Development estimates highlight that the volatile nature of global agricultural prices will tend to increase or remain high in the future. ¹⁴ Within the current geopolitical context marked by uncertainty, the sustainability of supplies from world markets notably affected by periods of political instability and geopolitical conflicts may be questioned. While Algeria has been able to manage its provisioning over the last two years thanks to gas and oil revenues (whose prices are now rising), nothing indicates that this comfortable financial situation can be sustained in the medium and long term.

The economic and political shocks (to which we must add climate change) require strengthening the productive base of the agricultural sector, reducing the deficit in strategic products (cereals, milk and edible oils), and achieving greater independence of the food industry from external markets. Such recurrent crises call for choices aimed at ensuring adequate and sustainable production at the national level and guaranteeing safe food for consumers.

The availability of food supplies constitutes the main challenge facing food sovereignty.

The availability of food supplies – especially durum wheat, milk and potatoes – constitutes the main challenge facing food sovereignty.

This imperative calls for the necessity of moving away from the liberal logic of granting public loans, technical assistance, land and water to a minority of beneficiaries ( from agricultural or non-agricultural backgrounds), and of placing the future of the agricultural and food sector solely in the hands of “agricultural investors”, as mentioned above.

In light of these challenges (economic, social, environmental, climatic, etc.), it is necessary to identify ways and means for greater support to family farms, whose activities are now geared towards the production of basic foodstuffs and which are truly working for the food security of households, as well as for the land they use. Ensuring seed production capacity – which is the first link in the food chain – diversifying farming systems and protecting biodiversity, local assets and know-how are key objectives for progress towards food sovereignty.

As such, there needs to be a genuine paradigm shift in the current economic and technical paradigm. The technologies developed by the agricultural capitalistic undertakings, involving increased use of fertilizers, pesticides, imported machinery and genetic equipment, and the granting of privileges for access to land and groundwater to a minority of beneficiaries (both agricultural and non-agricultural), have not brought convincing results in terms of agricultural yields. These policy choices have only contributed to reinforcing the country’s economic and technical dependence. The industrial techniques applied to agriculture today contribute to soil degradation, overexploitation of water resources and reduction of biodiversity. In view of climate risks, it is essential to develop a new technical agricultural model, free of the technology driven model – inspired by northern countries with different agricultural climatic conditions than ours – especially for a country with a high consumption of chemicals, pesticides and agricultural equipment, most of which are imported. Time has come to reinstate the Arab, Berber and Andalusian agricultural heritage which, in the past, has been able to make the most of often fragile resources by inventing sustainable technical systems.

The way to food sovereignty, which needs to be outlined to secure the future, also requires restructuring the national agri-food system and ensuring a closer connection with the national production system in order to reduce its vulnerability to fluctuations in international markets.

Such solutions towards a sustainable agriculture and consumption are well within Algeria’s reach, providing that it relies on the mobilization of farmers, technicians, engineers and all active forces eager to build and contribute to a progressive future for the country.

Omar Besseoud / Algeria

Note: This text was written in French, translated into English by Siyada website (www.siyada.org)

This article is taken from our special issue about The Russian-Ukrainian war and its impact on food in North African Countries
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The most recent economic monitoring report on Algeria published by the World Bank (2021) confirmed the progress made in reducing inequality. This reduction is mainly the result of public subsidy policies, support measures for health and education, and housing made available by the State. The World Bank devoted the third chapter of its report to ” Trends in poverty and non-monetary inequality in Algeria “. The multidimensional poverty index is a non-critical approach that measures the level of deprivation by focusing on three major dimensions: health, education and living conditions. Data on these dimensions are aggregated into a single index ranging from 0 to 100, where 100 represents total deprivation. A person is considered “multidimensionally poor” if his or her deprivation level exceeds 33. Algeria’s multidimensional poverty index fell from 2.1 percent in 2013 to 1.4 percent between 2013 and 2019. This multidimensional poverty rate is better than that of its regional neighbors. Egypt (5.2%) and Morocco (6.1%). It should be noted, however, that signs of poverty persist in some areas, particularly in the north-central and northeastern parts of the country, which have lower levels of deprivation than other parts of the country.
The increase in production achieved through agricultural programs (National Agricultural Development Program, Agricultural Sector Support Program, Agricultural Plan 2019) has been overshadowed by the high demand for food due to population growth and the purchasing power of the population. See the study: Etude CREAD-PAM (2017). Analyse de l’état de sécurité alimentaire et nutritionnel en Algérie. Décembre 2017. 80 p
It is the traditional basic food in Algeria, and each citizen currently consumes about 200 kg per year, about 60 kg more than the global average (OECD-FAO, 2018). According to the UN Food and Agriculture Organization, Algerians buy and consume an average of 49 million rectangular loaves of bread per day, with an average consumption of 110 kg per citizen.
The commercial cereal season begins in June of the year and ends in July of the following year.
FOB Free On Board., No Transportation Expenses
In August 2021, the government entrusted the import of wheat exclusively to Algerian Interprofessional Office for Cereals in order to avoid imbalances felt on the wheat market, some of which had resulted from the practices of sector manufacturers who sought to mix the quantities imported with those allocated by the Algerian Interprofessional Office for Cereals, thus avoiding the control of the destination of the wheat subsidized by the State. The institutions that used to import to meet their own needs will now be supplied by the Office.
CIF i.e. calculating transportation costs and insurances.
The needs of the Algerian Interprofessional Office for Cereals have also been revised downwards due to high prices on the world markets.
Algeria, which did not condemn the Russian attack on Ukraine, was considered by Western countries among the “unfriendly” countries
In the spring of 2020, the Ministry of the Interior drew up a list of 2.2 million families who received a grant of 10,000 dinars. Thus, the government has allocated a budget of 22 billion dinars, in addition to food aid, for the benefit of 400,000 families..
The price of wheat production went from 4 500 dinars per quintal (d/q) to 6 000 d/q, the price of soft wheat from 3 500 d/q to 5 000 d/r and the price of barley from 2 500 d/q to 3 500 d/q.
A first batch of 97,000 hectares was allocated last year, and a second batch of about 150,000 hectares was made available to investors in October 2022.
Analysts at Tallage/Stratégie Grains – an agro-economic research firm specializing in the European and international grain and oilseed markets.
OCDE-FAO (2018). Perspectives agricoles de l’OCDE et de la FAO 2021-2030. Principaux éléments de projection.