The cost of a loaf of bread is shaped not only by wheat prices, but also by wars, shipping routes, and the structure of food supply chains, according to a new study published in the Future Business Journal.
The study examined how geopolitical risks affected value-chain costs in the milling industry in Egypt and Saudi Arabia between 2020 and the first quarter of 2025. The researchers analysed quarterly data from 11 publicly listed milling companies — seven in Egypt and four in Saudi Arabia — resulting in a total of 231 firm-quarter observations.
According to Maysa Ali Mohamed Abdallah of the Accounting Department at Tanta University, the study’s lead author, the milling industry is not an ordinary business sector in the region. It is directly linked to food security, wheat imports, fuel prices, and the daily availability of bread. This means that shocks in global politics can quickly translate into disruptions within flour mills.
The study focused on two major geopolitical disruptions: the Russia-Ukraine war and Houthi attacks in the Red Sea. It also examined economic pressures, including global wheat prices, fuel prices, exchange-rate fluctuations, and inflation. The researchers then examined whether these shocks have a greater impact on firms that depend on a small number of major wheat suppliers, or whether more diversified supply chains can help soften the impact.
The findings show that lower political stability increases total value-chain costs, while greater stability helps reduce them. These costs include wheat procurement, inbound logistics, storage, production, distribution, sales, and administrative expenses.
The study also found that Houthi attacks in the Red Sea increased costs by disrupting shipping, delaying supplies, raising security expenses, and prompting some vessels to take longer routes.
The impact, however, differs between Egypt and Saudi Arabia. Red Sea disruptions appeared to pose greater risks for Saudi Arabia than for Egypt, partly because of the Kingdom’s strong links to regional trade and energy routes. Egypt faces a different vulnerability: its heavy dependence on imported wheat. The study notes that Russia and Ukraine accounted for about 86% of Egypt’s wheat imports, leaving Egyptian mills highly exposed to disruptions in the Black Sea region.
The pressure does not come from war alone. The statistical models show that rising global wheat and fuel prices, currency volatility, and inflation all push milling costs upward.
In Egypt, local fuel prices had a significant effect on costs, reflecting their role in transportation and production. In Saudi Arabia, the same effect was weaker, which the study attributes to domestic oil production and price-management policies that help shield companies from fuel-price volatility.
One of the study’s most important findings concerns supply-chain structure. In Egypt, dependence on a small number of dominant suppliers increases vulnerability and raises costs. When a major supplier is disrupted, procurement and logistics costs can rise quickly.
In Saudi Arabia, the picture is different. More diversified procurement strategies and stronger strategic partnerships appear to help Saudi mills absorb shocks and, in some cases, secure better terms from suppliers.
The study also found that public policy matters. Bread subsidies in Egypt may reduce some of the cost pressures caused by geopolitical risks, at least temporarily. Privatisation, meanwhile, can raise costs in the short term as companies transition from state ownership to private ownership, but the study suggests that it may subsequently improve efficiency and make supply chains more flexible.
The authors argue that milling companies and policymakers should treat geopolitical risk as a real cost factor rather than distant news. For Egypt, they recommend building stronger strategic wheat reserves, investing in agricultural innovation, expanding local production where possible, and diversifying wheat suppliers to include alternatives such as Argentina, Romania, and India.
For Saudi Arabia, the researchers recommend maintaining bulk purchasing power while retaining backup suppliers and supporting domestic production under Vision 2030.
