Optimal Domestically-Sourced Commodity Portfolios for Re-Emerging Civil-Strife-Torn MENA Agriculture Sectors

Abstract

The Middle East and North Africa region is arguably the most politically volatile and food insecure area on earth. The sum of civil disruption and endemic food-security constraints has reduced many MENA nations to the equivalent of small, import-dependent countries, regardless of population. Such countries are especially vulnerable to commodity-price volatiltity, the focus of this paper. As MENA countries begin to arise from civil strife, they must attempt to diminish the food-price risk that results from import dependence. This paper describes a constrained-optimization model that can produce optimal domestically-source commodity portfolios for re-emerging MENA agricultural sectors, nested in domestic production and strategic storage. The model is driven by the use of financial-economics concepts to inform a representation of commodity-price volatility.