Feeling the cost of drought and war

The latest tender sought shipment in two periods - June 1-15 and June 16-30 - from main supply regions, including the Black Sea and Europe.

If the successful tenderer is sourcing the wheat from South America or Australia, shipment is to be one month earlier.

The OAIC is Algeria's state-owned cereals office, which acts as a regulator and supplies the raw materials required to maintain the production of subsidised bread.

It is currently responsible for all of the country's wheat imports.

Each year, the OAIC decides the amount of wheat it will supply based on global wheat prices to ensure a baguette of bread is kept at a set price.

Wheat is imported via international tender and provided to the private mills at subsidised prices.

The OAIC does not release the results of its tenders. Quantities and prices are based on analysis and estimates from the trade.

The price paid in last week's tender is believed to be about US$448 per tonne, including freight (C&F). This is significantly lower than the previous tender.

In early March, OAIC purchased between 600,000 and 700,000 tonnes of milling wheat at US$485/t (C&F) for May shipment, which was US$37/t higher than last week's price.

In mid-February, before the Ukraine conflict began, Algeria purchased about 700,000 tonnes of milling wheat at about US$346/t (C&F).

This demonstrates the impact of the Russian invasion on the cost of food for Africa's Maghreb states, which include Algeria, Libya, Mauritania, Morocco, Tunisia and Western Sahara.

Maghreb countries have long grappled with food insecurity.

Climate change has exacerbated this problem, with increasingly regular droughts alternating with large-scale floods that destroy agricultural infrastructure and crops.

The COVID-19 pandemic has further disrupted their economies, pushing food prices even higher.

Algeria's annual inflation rate hit 8.5 per cent in December last year, and it has continued the upward spiral in the first quarter of 2022.

The latest tender comes less than three weeks after Algeria's president Abdelmadjid Tebboune ordered an export ban on several imported and manufactured consumer products, such as sugar, pasta, oil, semolina and all wheat derivatives.

The government will also continue to ban the import of frozen meat to encourage the consumption of locally produced meat.

Any company or individual contravening the bans runs the risk of legal action and prosecution.

The ban, and the past two wheat tenders, all followed an announcement in early March from Algeria's minister of agriculture and rural development that the country had adequate grain reserves to last until the end of this year.

The government said it had taken all precautions possible to secure enough grain to satisfy domestic requirements.

The local press suggests the statement was made amid fears of a supply crisis due to the war between Russia and Ukraine, which would increase domestic food prices and potentially lead to civil unrest and political instability.

According to the latest Foreign Agricultural Service (FAS) update on Algeria, domestic wheat consumption will total 11.1 million tonnes in the 2021-22 season. Of this, 8 million tonnes - or 72 per cent - will need to be imported.

This highlights Algeria's reliance on foreign-supplied wheat, exacerbated this season by poor domestic production.

FAS forecasts a wheat crop of just 2.5 million tonnes, which is down 36pc from 3.9 million tonnes in 2020-21.

Throughout December 2021 and January 2022, Algeria received about one-third of its average rainfall.

At the start of February, the country's dams were at 37.56pc of capacity.

Rainfall in February and March was not much better, and the crop in most regions is suffering moisture stress as it enters the critical grain fill stage.

In the early March tender, French wheat returned to the Algerian menu after it was excluded in February.

Russian supply issues forced the Algerian government to renege on a recently announced French wheat exclusion, imposed after relations were damaged in October.

French President Emmanuel Macron questioned whether there had been an Algerian nation before French colonial rule, accusing it of rewriting its colonisation history.

But the lower offers in last week's tender suggested to many that Black Sea origin wheat may be supplied.

Trade feedback on Friday of last week confirmed that theory, with Romania and Bulgaria reportedly winning about 80pc of the business - the balance likely being of French origin.

And the big irony is that the grain could indirectly come from Ukraine.

The Romanian government is in the process of facilitating a transfer mechanism for grain to move from Ukraine to its Black Sea port of Constanta.

Ukraine is currently losing about US$1.5 billion per month in agricultural export income after the Russian invasion blocked its Black Sea ports.

The government has been actively seeking alternative logistics routes, such as the Romanian option, to get its goods into the export market and earn much-needed income to feed its people and fight off Russia.

The goal is to export 600,000 tonnes per month via Romania. This is small relative to Ukraine's typical export pace, but vitally important nonetheless.

As Romania is a member of NATO, its waters are protected and, as the European Union's second-biggest grain exporter after France, it has the crucial export infrastructure and capacity.

Constanta is the largest port on the Black Sea, handling more than 67 million tonnes of exports in 2021, including 25 million tonnes of grain.

Just like the Algerian situation, the Russian invasion of Ukraine is having deadly consequences for many northern African nations - most of which are heavily dependent on grain from the Black Sea region.

Supply disruptions can be mitigated to a large degree at the moment via shipment from alternative origins.

But the soaring cost of food is having a direct and immediate impact on the lives of millions of people.

This, of course, does not bode well for political stability in the region.

As Herbert Hoover once famously said: "hunger is the mother of anarchy".