Following more than two years of political inertia and stagnation, a spirit of optimism is gripping Lebanon after the election of a new president on October 31, 2016, and the imminent formation of a new national unity government. There are great expectations that this optimism will be translated into a more conducive environment for higher economic growth in 2017. While it is premature to predict the magnitude and sustainability of such growth, most analysts anticipate significant improvement compared to the sluggish growth witnessed during 2015 and 2016.
As with other sectors, agriculture is expected to benefit positively from any improvement in the overall political and economic climate in Lebanon. If 2017 witnesses higher economic growth rates and improved per capita income, then consumers’ spending on food products would also increase. However, since Lebanon imports more than 80 percent of its food needs, the impact of higher economic growth on domestic agricultural production and farmers’ incomes will not be very significant. Instead, I would argue that the most critical factor for the performance of the agriculture sector in 2017 will be the ability of Lebanese farmers and exporters to maintain and improve their access to export markets.
Lebanese agriculture depends heavily on exports, particularly to the Middle East market, which represents more than 85 percent of Lebanon’s total agricultural exports. In 2015, fruits (mainly apples, citrus, bananas and grapes) accounted for 46 percent of total agricultural exports compared to 42 percent for vegetables (mainly potatoes and leafy greens). Syria has traditionally been Lebanon’s largest trading partner for agricultural products, with the Syrian market accounting for 16 percent of Lebanese agricultural exports in 2012. With the sharp decline in the purchasing power of Syrian consumers as a result of several years of protracted conflict, Lebanon’s agricultural exports to Syria have sharply declined and, by 2015, they were down by more than 32 percent compared to their 2012 levels. Agricultural imports from Syria also witnessed a sharp contraction as a result of the Syrian conflict, dropping by about 29 percent between 2012 and 2014. However, with the rapid devaluation of the Syrian pound during 2015, agricultural imports from Syria started rising again, with a 14 percent increase in 2015. In 2016, Syrian agricultural imports have continued to grow, prompting the Lebanese government to threaten to ban imports from Syria and the Syrian government retaliating with threats of countervailing measures on Lebanese agricultural exports to Syria. Lebanon grows some 125,000 tons of bananas per year and previously exported around 50 percent of total production to Syria, as of 2012. This figure declined to about 30 percent in 2015, which represents an almost $2 million loss in export value ($10.8 million in 2012 compared to $8.9 million through September 2016). In 2017, it is anticipated that the new national unity government will try to improve its agricultural trade relationship with Syria, thus reducing the threat of a potential ban on the import of some Lebanese produce, particularly bananas, given that the Syrian market accounts for more than 85 percent of Lebanon’s banana exports.
It is safe to assume that the border crossings are unlikely to reopen in 2017 and, as a result, Lebanese agricultural exports are expected to stagnate
In addition to Syria, five other Arab countries represent Lebanon’s main export markets, with about 74 percent of the share in 2015: Saudi Arabia (18 percent), Egypt (18 percent), Kuwait (13 percent), UAE (12 percent) and Jordan (12 percent). Lebanon’s agricultural exports have been increasing steadily over the past ten years and witnessed an impressive surge of more than 25 percent in 2013 alone, with total agricultural exports amounting to $249 million, equivalent to about 12 percent of the agricultural GDP and representing 5 percent of total exports. However, the closure of the last border crossing between Syria and Jordan in May 2015 made it impossible for Lebanese exporters to reach their markets in the Gulf by land. In response, the government introduced temporary subsidies for sea shipments of agricultural produce to the Gulf in September 2015. These subsidies were extended for another year in October 2016. In spite of the subsidies, agricultural exports contracted by about 5.2 percent in 2015 and by another 4.5 percent during the first six months of 2016.
The reopening of the border crossings between Syria and Jordan remains unlikely anytime soon, and will largely depend on security and political developments within Syria. However, it is conceivable that an agreement on reopening the crossings could come about as part of any possible ceasefire agreements that might be reached in southern Syria, given that all concerned parties have a vested interest in resuming trade. Nonetheless, it is safe to assume that the border crossings are unlikely to reopen in 2017 and, as a result, Lebanese agricultural exports are expected to continue to stagnate. However, the fact that the decline in agricultural exports since May 2015 has not been larger should be viewed as a somewhat positive sign about the resilience and entrepreneurship of Lebanese exporters and their ability to find alternative export routes and markets. There are increasing reports of exporters partnering with shipping companies to bring in refrigerated trucks and containers as more cost-effective methods for sea shipment, instead of using ferries to transport trucks and their drivers to the Gulf ports. Though it is not clear yet if these measures will allow Lebanese agricultural exporters to maintain their market share in key Middle East markets. Moreover, there are also indications that Lebanese agricultural exports to new markets such as Turkey, the European Union, the United States, Canada and Russia are gradually increasing. Although exports to these new markets remain relatively small compared to Lebanon’s traditional trade partners in the Middle East, the potential for growth in the medium-term remains very promising.
It should also be noted that the foreign exchange crisis in Egypt in 2016 had a particularly negative impact on the exports of Lebanese apples, since Egypt has traditionally been the single largest importer of apples from Lebanon, accounting for an average of 75 percent of total apple exports. Apple exports to Egypt in 2012 were about 88,000 tons, representing $12.9 million by value. This fell to 57,000 tons in 2015, resulting in an export value decrease to $8.83 million. With the recent Egyptian government decision to remove its previous restrictions on the transfer of foreign currency out of the country, apple exports in 2016 are expected to pick up and could be equal or slightly below their 2015 levels.
Although access to export markets will be the key determinant of the performance of the agricultural sector in Lebanon in 2017, unfavorable weather conditions could also play a significant dampening role. Agriculture is by far the most dependant sector on weather: rainfall patterns, snowfall, hail, temperature, frost, wind and other weather events are extremely unpredictable and yet can make or break the agricultural season. In 2014, Lebanon witnessed its worst drought in forty years, resulting in a major drop in plant and animal production levels. Although 2015 and 2016 witnessed average-to-favorable rainfall levels, agricultural production was badly affected in several parts of Lebanon by damages caused by snow, hail, frost and wind, while other areas were affected by particularly high temperatures in the winter and the spring. Furthermore, the rainfall levels in 2015 and 2016 were not sufficient to replenish the groundwater levels following the extreme drought of 2014. Therefore, we continue to witness rapidly declining groundwater levels, which will further exacerbate the availability of irrigation water, especially during the peak irrigation season from May to September. Rainfall levels for the current 2016/17 growing season do not look promising so far; by mid-November, accumulated rainfall levels in most parts of Lebanon were drastically low, ranging from 60 to 80 percent below their long-term averages.
If rainfall levels stay low during the remainder of the season, Lebanese farmers may face a difficult year in 2017. The delay in autumn rains have already forced wheat and barley growers to postpone the sowing of their crops. Further delays in the planting of cereal crops could result in a substantial decline in yields. Moreover, the lack of rainfall, accompanied by very warm temperatures, has already resulted in more frequent forest fires during October and November 2016.