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Lebanon 2014 | AGRICULTURE | REVIEW: AGRICULTURE

Long renowned for its quality agricultural produce, Lebanon today has a burgeoning agro-industrial base and continues to bolster its name as the source of many a fine wine. Structural challenges remain to getting the most out of the land, however.

With the Levant often referred to as the “home of agriculture," it's easy to understand why Lebanese produce often makes a splash. Organizational barriers, though, hinder the sector's growth and profitability.

Such barriers include land fragmentation and low mechanization rates, while exporters struggle with a complex trade agreement framework and high costs. The country's main agricultural exports are fruits and vegetables, while Lebanese wine also continues to make its mark on foreign palates. Agro-industry is also fairly big business, with $453 million of total industrial exports of $3.076 billion represented by prepared foodstuffs in 2013, according to BLOMINVEST BANK.

LAY OF THE LAND

According to a report from Al Akhbar, the sector suffers from high costs of production, monopoly of traders, and unfavorable trade agreements. Food security is also a concern, with 280,000 hectares of the 1.1 million hectares of exploitable land actually utilized, only 32% of which is irrigated. The sector also suffers from fragmentation, with another report, this time from the American University of Science and Technology's Basam Hamdar, reporting that agricultural land is divided into 195,000 parcels, with 50% less than 5 dunums in size. This impacts the mechanization rate, which stands at under 25%, well below that of the EU and sometimes lower than neighboring Arab states in some crop categories. The sector represents some 5% of GDP and 6% of the workforce. But according to the Basam Hamdar report, 70% of those engaged in agriculture are also involved in other economic activities to support their basic needs. The report also estimates that up to 60% of farmers produce for their own consumption.

Lebanon does have further potential, however, boasting a moderate climate and abundant water sources. Lebanon is also blessed with more rain than its neighbors, averaging 2.2 billion cubic meters per year. The Bekaa region represents the country's breadbasket, with 40% of the Bekaa plain cultivated. The North is also a strong focus for agriculture, while in the South much production is carried out in greenhouses.

PRODUCTION & EXPORTS

Lebanon's key agricultural produce categories are fruits, including mainly apples, oranges, bananas, grapes, and olives, which account for 41% of total production, and vegetables, including potatoes, tomatoes, and maize, which account for 23% of the total. In fruit, the largest sub-category, according to the Investment Development Authority of Lebanon (IDAL), is citrus, representing 28% of total fruit production. That is followed by apples on 19%, grapes on 15%, and bananas on 11%. In export terms, the MENA region remains the largest market, but Lebanese produce also finds its way into fruit bowls and vegetable baskets in more distant markets, with France importing 456 tons of apples in 2013 and Germany importing 596 tons. In terms of citrus fruits, Saudi Arabia was the largest importer, hauling in 21,144 tons in 2013, followed by Russia, Australia, France, the UK, and Africa. In potato terms, 189,339 spuds filled sacks leaving Lebanese shores in 2013, mainly to the Arab world, Russia, and Africa. Olives are also a big export category, with the salty treat finding its way around the region as well as to Spain, Germany, France, the UK, the Netherlands, Ukraine, Sweden, Canada, Australia, Latin America, and Africa.

AGRO-INDUSTRY

Lebanon's agro-industry sector is based mainly around food processing and production, holds a share of around 2% of GDP, and represents over one-quarter of the industrial sector's added value. Just over 20,000 people are at work in the sector, around one-quarter of the industrial sector's total labor force. The sector has also avoided the negative impacts of crisis in Syria. Lebanon is compensating for the loss of the troubled country as a significant export market with increased demand from markets previously used to buying from Syria itself, with the value of prepared foodstuff exports rising from $380 million in 2011, to $392 million in 2012, and $453 million in 2013. That $453 million in exported prepared foodstuffs represented 46% of total yearly production, leaving the rest for domestic consumption. The exports of manufactured food products represented 1% of GDP in 2013, far higher than the 0.5% accounted for by raw agricultural exports, which also represented 5.5% of the country's total exports for the year, compared to 11.4% for manufactured food products. Top manufactured export categories included processed vegetables, fruit, and nuts (25.6%) and beverages, spirits, and vinegar (22.1%). On the flip side, top imports included tobacco, cereals, starch, and milk products. There remains a trade deficit in terms of agro-industry, which stood at $957.39 million in 2013, a bit better compared to the previous year's figure of just over $1 billion. According to BLOMINVEST BANK, the average price per ton of exports dropped by 13.4% in 2013, with the cost of imports per ton also dropping, albeit at a slower rate of 8.5% YoY.

Olive oil is also a significant part of the country's agro-industry matrix, with approximately 100,000 tons produced per year. In 2013, exports of olive oil grew 70% YoY to reach 7,085 tons at a value of $22.45 million, up from 4,163 tons at a value of $15.24 million in 2012. The majority of Lebanese olive oil exports find their way to the US (28%), Saudi Arabia (19%), and the UAE (10%). BLOMINVEST BANK also reports a drop in the price of exported olive oil to $3,168 per ton, down 13.5% YoY. When importing, that figure comes down to just $2,000 per ton, good news for Lebanon, which was a net importer in 2013 as it sourced 5,428 tons of the oil from abroad, at a price tag of $10.87 million, 98% from Syria. Due to the high price of exports, however, olive oil posted an external trade surplus of $11.58 million in 2013. A positive trade agreement with the EU, which allows a certain amount of the olive oil to be exported duty free, also helped along the sector in 2013. Elsewhere, exports of dairy products were up 5.2% in 2013 after two years of decline, and were worth $9.29 million.

WINE

Lebanon's wine industry is worth $50 million, with 33% of the 8 million bottles produced annually exported. There are around 40 producers, representing 2,000 hectares of vineyards. Just over 20 of the approximate 40 producers are members of the Union Vinicole du Liban (UVL), and those represent 95% of production. Production is centered on the Bekaa Valley, Mount Lebanon, and the South, where nearly 30 grape varieties are employed. Indeed, with a 7,000-year history of viniculture in the region, it is clear to see why interest is growing in produce from the Levantine nation. But Lebanon is still far from the giants of France, Italy, and Spain, which represent half of the world's supply, representing just 0.05% of total global output, making it the 45th largest winemaker. The country is a net exporter, with imports worth $12.1 million in 2012, while exports were worth $14.3 million. Major export destinations include the UK (29%), France (17%), and the US (13%). According to BLOMINVEST BANK, the three largest exporters in Lebanon are Château Ksara, Château Kefraya, and Château Musar. And thanks to Lebanon's adaptation of the Euromena Accords, the price of imported wine is also falling in the country as import taxes drop, meaning that in 2012 the Lebanese paid, on average, 8% less than in 2011, at $11.64.

While challenges remain to getting the most out of Lebanese soil, the sector has remained resilient in the face of regional strife with more and more manufactured products reaching foreign shores. But while exports increase in value, concerns at home must be addressed if Lebanon is to ensure food security and reduce its dependence on imports.