PERCHANCE TO GROW

Lebanon 2012 | AGRICULTURE | REVIEW: AGRICULTURE

Still a major employer in Lebanon's economy, the sector is undergoing restructuring aimed at consolidating and adding value to the country's agricultural produce.


Focused on the Bekaa Valley, a region once considered among ancient Rome's core granaries, Lebanon's agriculture sector is undergoing reform aimed at improving infrastructure and moving produce up the value chain. Despite a relative retreat over the last three decades as the country diversified away from industry and agriculture and into services, the agriculture sector still accounts for around 5% of GDP and employs between 20% and 30% of the working population, according to the Ministry of Agriculture's 2010-2014 Program of Action report. Land used by the agriculture sector covers more than a quarter of Lebanon's total area—over 270,000 hectares. Of this, around 14,000 hectares is irrigated. While 73% of agricultural production was devoted to crop and plant cultivation, 27% was derived from animal husbandry. The country is, however, reliant on food imports, sourcing 80% of its food needs from abroad. Agricultural imports, in that respect, account for over 15% of the country's total imports. The majority of imports are processed products, while a significant amount of unprocessed products are also imported. These imports amounted to $955 million in the first half of 2011, a value almost 10 times higher than the value of agricultural exports. These figures widened the agricultural trade deficit to $858 million at the end of 1H2011, up by 19% over the same period in 2010.

The sector faces challenges related to high energy, labor, and irrigation costs, the fragmented nature of the sector, the absence of agricultural credit, and unbalanced urbanization. The lack of a concise marketing strategy is also hindering the country's agribusiness sector, which despite challenges is still showing growth signs. Wine is leading the charge of Lebanese agro-products on the international stage, and production of Lebanese wine reached 8 million bottles in 2011.

PRODUCE & DISTRIBUTION

There are over 52,000 hectares of wheat production and 15,750 hectares of barley production in Lebanon, mainly focused on the Bekaa Valley, which is home to 62% of total cereal production in the country. The next major producing area is North Lebanon, with 23%. The Bekaa Valley also dominates the pulses sector, including chickpeas, kidney beans, and green beans—over 50% of all production being centered in the valley, a total of over 5,000 hectares. In the country's vegetables sector, the majority of hectares are dedicated to potato production, with 20,100 hectares designated to the tuberous crop. Next in line is the tomato, with 4,060 hectares, cucumbers, with 3,100 hectares, cabbage, with 1,950 hectares, squash, with 1,600 hectares, watermelon, with 1,550 hectares, and okra, with 1,238 hectares. Again, over 50% of total vegetable production is focused on the Bekaa Valley, and just over 30% on North Lebanon, according to Ministry of Agriculture statistics. Approximately 70,000 hectares are also designated for fruit trees, the species of which include; citrus, apple, pear, apricot, cherry, peach, almonds, and grape. Around 35% of this production is in the Bekaa Valley, 28% in North Lebanon, and 19% in Mount Lebanon. North Lebanon, however, dominates olive production, with 42% of the country's approximate 60,000 hectares of production sited there. Nabatiyeh is also home to 20% of production, whereas the Bekaa Valley hosts only 4%.

The Bekaa Valley is also home to the lion's share of Lebanon's animal and milk production. The most populous species is goat, at 434,700 head—54% of which are for dairy production. There are also 324,000 head of sheep, and 67% of them are devoted to the dairy industry, specifically for cheeses. Additionally, there are 77,400 head of cattle, with 58% devoted to dairy. According to 2007 statistics from the Ministry of Agriculture, over 180,000 tons of cow milk, 25,000 tons of sheep milk, and 34,000 tons of goat milk were produced. A total of 135,200 tons of chicken meat was also produced, and 762 million eggs.

Freshwater aquaculture has also been practiced in Lebanon since the 1930s, and over 90% of production in Lebanon is rainbow trout—1,100 tons of which were produced in 2010. Aquaculture is significant to certain regions of the country, including Hermel, Yammouneh, and Anjar, where it is the second main economic activity.

AGRIBUSINESS

Agro-food is the largest sub-segment of Lebanon's industrial sector at 22%, ahead of the chemicals sector on 19%. Bakery products are the mainstay of the agribusiness sector, and over 9,000 establishments are present in the sector. The next largest is confectionery products, with 1,007 establishments. The other main sub-segments in the Lebanese agribusiness sector include meat and fish processing, fruit and vegetable processing, vegetable and animal oil and fats, dairy products, ice cream, grain mill products, sugar, alcoholic drinks, and soft drinks and mineral water.

Industrial exports represent over 90% of the country's total exports, and the agribusiness sector is a large exporter too. Arab countries represent the main destination for many of Lebanon's agro foods, with 40% of all produce distributed throughout the region. Europe, however, represents around 10%. Wine has been a major success of the Lebanese agriculture sector, with wines from the Levantine nation becoming more and more common in established wine-drinking countries. “We are, however, proud to say that our wine is produced using only Kefraya grapes, and we do not bring in any external produce," Michel de Bustros, General Manager of Château Kefraya told TBY. With approximately 8 million bottles of wine produced in Lebanon in 2011, exports are becoming big business. Currently, Château Kefraya exports to 40 countries. Additionally, Château Ksara, which has an annual production of 2.7 million bottles, exports 40% of its produce. “We export to over 30 countries. Our neighboring exports go to Syria and Jordan. We also export to European countries such as France and the UK as well as to the US, where we have three distributors," Zafer E. Chaoui, Chairman and CEO of Château Ksara, told TBY.

In the confectionery world, Patchi is a leading producer and exporter of chocolate, contributing to the Lebanese agribusiness' ascent up the value chain. Using a combination of local and imported produce, Patchi has a presence in 25 countries and distributes around the globe. The company is now looking to go public on the London Stock Exchange, with an IPO mooted for mid-2012, Nizar Choucair, Chairman and Founder of Patchi International, told TBY.

FOREIGN INVESTMENT

FDI inflows increased by 3.2% to reach $4.965 billion in 2010, with the agriculture sector representing attracting 2% of the total. One recent investor was NPPC, an international packaging house for agricultural products, yet FDI inflows to the sector remain relatively insignificant. With increasing investment on its agenda, the Ministry of Agriculture is looking to tackle the challenges of high production, energy, and human resources costs. “If we experience a higher cost of production than Syria, Egypt, or Iraq then we will not be competitive in the marketplace," Hussein Hassan, Minister of Agriculture, told TBY.

With plans afoot for the government to provide more incentives to agricultural producers, the attractiveness of the sector to FDI is likely to increase. One potential means of industry support could be through the reduction of customs costs on the import of agricultural inputs, such as machinery and fertilizers, and the Ministry is currently looking at such potential avenues of action.