Trade strategies to mitigate the global impact of regional wheat production shocks

Abstract

Shocks in regional wheat production can have severe repercussions for dependent importing countries elsewhere. Impacts due to climate extremes, natural disasters, but also (subsequent) export restrictions, reduce volumes of crop produce on international markets that can jeopardize local to national food security. In this manuscript, we consider the capacity of the global wheat trading network to absorb such shocks and identify the trade links between exporting and importing countries that are critical to do so.We specifically consider two questions:1. Without changing current trade links, can quantities traded be altered to improve the adaptive capacity of the global trade network to mitigate the impact of shocks?2. In the event of various shocks, which trade links must be versatile to ensure optimal reduction of global wheat deficit?We impose wheat production shocks in Eastern Europe and Russia, the USA, and Australia to simulate shocks in line with historic events. Assuming that increased prices would stimulate exporting countries to tap into their storage after satisfying domestic demand, we evaluate the most important trade links to optimally reduce the global wheat deficit. As such, we employ ant colony optimisation to reduce the global wheat deficit caused by the regional shocks. The ease with which different trade strategies can be implemented in practice is also considered. Countries cannot establish new trading links but can alter traded amounts. Thus, the minimum global deviation of estimated current traded quantitities is also minimised. The decision variables considered in the optimisation problem are the volumetric tradable quantities of wheat between countries, which allows for consideration of alternative trading strategies on a global scale. Two cases were considered, 1) all countries were able to access their initial storage, in all shock scenarios, to assist in the global reduction of deficit; 2) Russia, the largest exporter, was disallowed access to its storage for export purposes in accordance with historic requirements.We find that the current global trade network could not completely mitigate the deficit incurred as a result of the simulated shock. However, by redistributing trade quantities on existing trade links, the deficit was reduced considerably in all scenarios. Out of 619 trade links considered, 240 were found to be directly used in achieving minimum deficit solutions. However, while there is significant benefit in increasing the number of active trade links initially, this benefit diminishes towards the lower end of global deficit values. Activating the 30 most important trade links accounted for reducing the global wheat deficit in all scenarios by 80 to 95%.The study examines the (theoretical) ability of the trade network as a whole to mitigate the impact of shocks.Importing countries with only a few trading partners are at risk to wheat production shock occurring in those exporting countries. In addition, countries that are generally reliant on a variety of suppliers, but come t...