Bridging the food gap

All countries in the Middle East and North Africa region run large deficits in agricultural trade, including those that produce and export substantial amounts of food. Published in MEED, 17 February 2014

It is not an easy life being a farmer in the Middle East. In many parts of the region, water is scarce to nonexistent, the soil is often of poor quality and the heat of the summer sun can be unforgiving.

That does not stop people from trying, however. There is an active agriculture sector in every country in the region, although the scale of operations in some places is very small, including in Bahrain, Qatar and, at the other end of the region, the Western Sahara.

Arable farming

When it comes to arable farming, the most important areas are the countries of North Africa and those in the ‘fertile crescent’, including Syria, Iraq and parts of Iran. Between them, Iran and Sudan account for about half of all land planted with cereals, according to data from the UN Food & Agriculture Organisation (FAO), while Iran and Egypt are responsible for more than half of the region’s output as measured by tonnes of production.

Unsurprisingly, given their climate and desert conditions, the other Gulf states do not do so well, with only Saudi Arabia producing sizeable amounts of cereals. At about 1.6 million tonnes a year, the kingdom’s output is greater than the rest of the GCC and Yemen combined. Jordan, Lebanon, Libya, Mauritania, the Palestinian territories and Western Sahara are also small producers.

For most North African countries including Algeria, Egypt, Morocco and Tunisia, wheat is the most important crop, with maize or barley second and third in importance. It is the same for Iran, Iraq and Syria. Sudan’s arable farming has a different focus, however, with sorghum making up the bulk of cereal production, followed by millet.

This picture is mirrored across the region as a whole. With production of 40.8 million tonnes in 2011 (the last full year for which data is available), wheat accounted for more than half of all cereal crops. It was followed by maize with 9.3 million tonnes, barley with 8.9 million tonnes, rice at 8.4 million tonnes and sorghum at 6.4 million tonnes.

There is a similar situation when it comes to fruit and vegetable production, with Iran and Egypt as the two largest producers, followed by Morocco, Algeria, Iraq, Syria and Sudan.

The livestock sector is also dominated by the same group of countries, with Sudan the leader in most areas. With 49 million sheep, Iran has the largest flock, followed by Sudan with close to 40 million and Algeria with about 24 million. Sudan has the largest herd of cattle, with 29.6 million, followed by Iran with 8.6 million and Egypt with 4.8 million. Sudan and Iran have the largest herds of goats, while Iran and Morocco are the leaders when it comes to poultry.

Some other countries fare better when it comes to the size of their camel herds, however. Sudan is the clear leader here as well, with 4.7 million camels, followed by Mauritania and Yemen with 1.4 million and 405,000 respectively.

Differences in climate and topography explain the varying strengths and fortunes of agriculture sectors across the region. They also help to explain why Gulf governments have been such keen investors in agribusinesses in North African countries such as Sudan and Egypt. The current oil boom means they have plenty of spare capital and, by buying up farmland in other countries, they hope to ensure guaranteed access to food supplies in the future.

“The entire [Saudi] agriculture strategy is to establish food security by investing in other countries,” says John Sfakianakis, chief investment strategist at Masic, a Riyadh-based asset management company that has invested in the agriculture sector.

However, Gulf governments have also tried to boost domestic production of agricultural goods from time to time. This tends to be expensive in terms of cash, but also in terms of the use of their limited water resources. Getting the balance right is difficult and there have been some significant changes in policy in recent years as governments have tried to find a sensible policy direction, particularly in Saudi Arabia.

Riyadh announced in 2008 that it was going to gradually withdraw government support for domestic wheat production with a view to ending all production by 2016. That decision was taken on the very sensible basis that the crop uses too much of the country’s limited water reserves. However, farmers have responded by devoting more land to crops such as alfalfa and dates, which are, arguably, even more thirsty.

Modern techniques

More recently, Abu Dhabi has embarked on a policy to increase its domestic agricultural production. In December, Khalifa Ahmed al-Ali, managing director of the Abu Dhabi Farmers’ Services Centre, announced the formation of the Agricultural Investment Fund with a budget of AED100m ($27m). The money will be spent over the next five years to support the development of the country’s farms and to promote modern techniques such as hydroponics, which involves growing plants in mineral-enriched water rather than soil.

Kuwait has also experimented with hydroponics and other countries have schemes to develop new farming techniques for dry climates, such as the Sahara Forest Project, which is working in Qatar and Jordan.

Even so, the money being invested in such schemes is a small fraction of what is needed if the Arab world is ever to close the widening gap between what it produces and what it consumes. In a speech made in April last year to the Council of Arab Finance Ministers, Sheikh Hamdan bin Rashid al-Maktoum, deputy ruler of Dubai and the UAE’s finance minister, estimated that $80.7bn needs to be invested in the Arab world’s agriculture sector to close what he termed the ‘food gap’.

Whatever investments are made, the fact remains that for Gulf states such as the UAE, there is no sensible alternative to buying food from abroad, while for other countries, the export of agricultural produce is a valuable addition to their trade flows.

Food exporters

The biggest exporters of agricultural produce in the region are Egypt and Iran, where exports bring in about $5bn a year, according to the FAO. However, the earnings can vary widely from year to year, depending on factors such as the success of harvests and international commodity prices.

The biggest import bill is paid by Saudi Arabia, which spent $19.5bn in 2011. That was the second successive year of substantial rises – in 2010 the figure had been $16.5bn, while in 2009 it was $11.2bn. The other big importers tend to be countries that have large populations, such as Egypt, or that are wealthy oil producers, such as the UAE.

However, all countries in the region run large deficits when it comes to agricultural trade, including those that produce and export substantial amounts of food.

The biggest gap between imports and exports is, again unsurprisingly, Saudi Arabia, which spends $16bn more on food imports than it earns from sales abroad, according to the FAO. The UAE comes second, with a net import bill of $10.9bn. But some of the North African countries also spend relatively large amounts on bringing in food and food products. Algeria, for example, runs an agricultural trade deficit of $10.4bn, while Egypt has a deficit of $9.5bn.

Such is the scale of its food imports that Saudi Arabia accounts for almost 17 per cent of all agricultural trade across the region, with a total value of close to $23bn a year. On the other hand, although the kingdom has the largest food bill, agriculture accounts for a relatively small amount of its overall trade. In 2011, imports and exports of food represented about 4.6 per cent of its total merchandise trade.

Agricultural trade

It is a similar situation with other major oil producers in the Gulf, despite their reliance on imported foodstuffs. In Qatar, agriculture trade accounts for less than 1 per cent of total trade, while in Kuwait it is 2.4 per cent and in the UAE the figure is 3.3 per cent.

The countries with the greatest reliance on agriculture trade include Egypt, where the sector made up 21 per cent of total trade in 2011; Syria, where it accounted for 17.8 per cent; and Yemen, where it was 6.6 per cent.

As with oil wealth, there is a clear divide across the region when it comes to agricultural industries, with rich Gulf countries having the most money to spend while some of the poorest have to outlay far more than they would like just to keep their people from going hungry.