Yemen: Food supply chain Update – Thematic report, 2 August 2023 – Yemen

OVERVIEW

Yemen’s dependence on imported food and fuel to meet local demand exposes its citizens to
sudden and prolonged changes in international market dynamics, including price hikes and
supply disruptions. Local market dynamics, including exchange rate variation, access to local
and foreign currency, and specific internal cost drivers (such as price capping), directly affect
local food prices. These factors affect household purchasing power and access to food based
on affordability. This affordability can fluctuate following local price hikes and reductions.

In 2020, ACAPS analysed the respective food supply chains and cost drivers for essential
food commodities imported into Yemen. Given the high consumption levels of wheat-based
food items in the country, this analysis focused on wheat. The 2020 report highlighted the
significance of many key challenges that traders faced, of which financial challenges, such
as exchange rate instability and access to credit, were primary. Other challenges included the
competition between the de-facto authority (DFA) in the north of Yemen (also known as the
Houthis) and the Internationally Recognized Government of Yemen (IRG) over import financing
and increases in overland transportation costs (ACAPS 16/12/2020).

This report provides an update on the main food supply chains and cost drivers in the country,
noting any changes that occurred at the international and local levels between January 2021
and June 2023. The most significant changes to international food and fuel price and supply
chain dynamics followed the Russian invasion of Ukraine in February 2022. The war in Ukraine
and the disruption caused to international fuel and wheat supply and price dynamics had a
notable impact on Yemen’s food and fuel supply chains. Yemeni wheat importers experienced
reduced access to wheat produced in India, Russia, and Ukraine. Although other sources for
bulk wheat were available, international wheat prices rose substantially owing to the disruption
to wheat export and crop cycles in Russia and Ukraine and other factors that included a
disruptive heatwave in India in March 2022.

International supply disruption often translates to local price increases (ACAPS 25/08/2022;
Markets Insider accessed 18/05/2023 a). Yemeni importers often initially absorb increased costs,
but if international food prices remain high for an extended period, the added costs are
reflected along the supply chain to the consumer. These costs put additional strain on Yemeni
households, many of which have experienced a significant reduction in their purchasing
power during the conflict. Reduced purchasing power limits Yemeni households’ access to
essential imported food commodities available in the market. Sustained higher international
and local food prices then carry the potential to trigger a drop in local demand following
increased unaffordability. To tilt the balance back in favour of the consumer, coupled with
other suspected political and market-focused motivations, the DFA-run Ministry of Industry
and Trade (MOIT) introduced and implemented food price caps in December 2022. The DFArun MOIT then applied and enforced further price reductions in 2023 (MOIT 10/12/2022).