Global Markets: Wheat – Investment in Milling Capacity Reduces Sub-Saharan Africa Wheat Flour Imports

    Sub-Saharan Africa has undergone a transformation in its wheat flour import market over the past 5 years. In 2016/17, Angola and Sudan were the two largest importers of wheat flour, importing primarily from the three largest suppliers to the region: Turkey, Egypt, and the EU.

    These three countries are responsible for 80 percent of global exports to Sub-Saharan Africa. Currently, Angola and Sudan play a much smaller role while other countries like Ethiopia, Somalia, and Benin have emerged as new key importers instead.

    Overall, the region’s wheat flour imports have contracted by around 40 percent over the past 5 years, while wheat grain imports have expanded as African countries make investments in domestic milling.

    Over the past decade, flour mills in Sudan have been established and expanded to satisfy domestic consumption demands. In 2017/18, Sudan stopped importing wheat flour almost entirely. This coincided with a series of economic reforms, including the elimination of its wheat subsidy and devaluing its currency1. As a result of the reforms, the price of bread doubled and imports of higher value end-use products (like flour) from the international market became significantly more expensive.

    After significant private industry investment, Angola now imports one-quarter of its 2016/17 wheat flour levels. In 2017, following a steep decline in oil prices, the Angolan government pushed for broader economic diversification, including the development of the country’s agroprocessing industry. Specifically, it launched a concerted effort to become self-sufficient in wheat flour production.

    Wheat flour imports reached nearly 1.0 million tons in 2016/17, valued at approximately $190 million, which put added pressure on the nation’s foreign currency reserves. With the opening of operations of the Grandes Moagens de Angola, Kikolo and Leonor Carrinho flour mills, Angolan wheat flour milling capacity grew to 840,000 tons per year.

    After years of lobbying from domestic millers, the Angolan government issued new tariff rates in 2019, eliminating duty-free access for wheat flour and raising import duties to 20 percent, with a further increase to 50 percent in 2020. The government’s initiative has met its goal, as Angola has now become largely self-sufficient in wheat flour production.

    Imports in 2020/21 were 247,000 tons, down almost 750,000 tons from the 2016/17 peak, when the economic development project began.

    Russian Wheat Exports Tempered by Restrictive Export Policies

    Russia’s 2021/22 wheat export forecast has been trimmed to 35.0 million tons as the country continues to announce and implement policies designed to ensure sufficient domestic supplies and stabilize domestic food prices by constraining exports.

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    The government announced an 11.0-million-ton grain export quota from February 15 to June 30, 2022, of which wheat will account for 8.0 million tons. Russia exported 21.6 million tons from July to December 2021. Last year, exporters rushed to export their wheat before the quota implementation on February 15, a pattern that will likely be followed again this year.

    In light of a smaller crop and food price inflation, Russia began a floating export tax in June 2021 which is updated on a weekly basis. The formula-based export tax is set at 70 percent of the difference between $200/ton and a calculation based on export contracts registered to the Moscow Exchange.

    The tax has escalated from $28/ton (June 2-8, 2021) to reach a high of over $98/ton (January 12-18, 2022). In December 2021, the Russian government approved a plan that would tax exports at progressively higher rates. Exports within the proposed quota will still be subject to the export tax.

    These various policies have affected some major export markets. For example, while Egypt continues to be one of Russia’s top export markets, its government tenders have begun sourcing more wheat from Ukraine and the EU this year. In contrast, Turkey will likely remain heavily dependent on Russia for wheat this year with its drought-reduced crop, projected record imports, and its historical reliance on this exporter.

    Meanwhile, reduced production in Iran has resulted in it becoming a new major destination for Russian wheat. Notably the restrictions on Russian wheat exports do not apply to Eurasian Economic Union (EAEU) countries which, in addition to Russia, include Armenia, Belarus, Kazakhstan, and Kyrgyzstan. Exports to these countries from Russia have remained robust over the past year, particularly to Kazakhstan.

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