It is much more than a vague, billion-dollar opportunity for growing cannabis. Lebanese agriculture today is a field with many plots whose diversity has already grown when compared with some five years ago. That was the time when political statements – and an expensive report – were drawing people like moths to the light to the idea that legalized cultivation of the cannabis plant would be a recipe for economic growth and could quintuple and formalize the estimated annual $200 million economic output of illegal hashish farming in the farthest reaches of the Bekaa valley.
Actually, there is no reason to think that further steps in legalization of cannabis cultivation in Lebanon (after the adoption of a law on its medical use in 2021) would not contribute to the economy’s recovery. But always advisable investor caution notwithstanding, the economic growth potential of cannabis as cash crop is immense, judging from the experience of the developing weed markets of North America – where estimated legal retail sales of marijuana for medical and recreational use in the US alone quadrupled from a low base of $3 billion in the five years from 2015 to 2019 – and from the – as usual, biased on the sales side – commercial research projections of a US market that could break $50 billion in retail sales around 2026. Moreover, and very important under Lebanese cultivation perspectives, there are the expectations of multi-billion-dollar legal cannabis sales (pending legalization) in Europe in the coming decade.
Considered against such market outlooks especially in Europe, the legal growing and processing industry potential in Lebanon may be quite impossible to quantify today. This means that economically forgetting or politically dismissing the weed option in agricultural development scenarios would be extremely counterproductive to hopes for optimally developing the agricultural sector by building a cannabis value chain and exportable cannabis product portfolios from the medical to the recreational.
A ponderable ponder
But while local proponents and seekers of an agricultural renaissance might not want to wait for these potent European cannabis markets to come online and certainly would not want to wait for the relevant legislation to move forward in Lebanon, there are two other areas that deserve attention.
The excessive reading of studies and strategy papers on Lebanon’s agricultural potentials and policies could raise the specter of a bad déjà vu, with sagely statements such as this: “Support to the agricultural sector should include improving marketing and distribution schemes, intensifying promotion, finding new markets, enhancing research, imposing pest and disease control, improving training and extension services, providing inspection services, and boosting infrastructural services related mainly to electricity and water supply.”
This sentence applies today yet it stems from an electronic file saved in 2004: it was written as a draft assessment of the EU-Lebanon Association Agreement of 2002 that was reached under the umbrella of the 1995 European-Mediterranean Partnership (Euro-Med Partnership) declaration and program. “Development of the agricultural sector will not only benefit the rural population but will also promote Lebanon’s overall economic status,” the Euro-Med assessment said, declaring that the “agricultural sector plays a multiple role in the Lebanese economy.”
Pouring over the paper, the first notion to strike are the macro-level and agricultural parallels between the current time and the turn of the millennium. For example, the GDP then stood at $19.5 billion (a cited IMF estimate for 2004) versus the World Bank’s latest forecast of a 6.5 percent contraction in 2022 from last year’s $22 billion estimate, albeit shared by a much larger number of people in Lebanon. What makes the past 20 years feel like a lost generation specifically in agriculture, are statements where the assessment of the early 2000s points out baseline realities – such as the fact that land resources for agricultural use are limited to about a quarter of the small country and encroachment of urban sprawl – and structural factors that appear as true and relevant today as they were then. About the structure of the agricultural sector, the paper noted that 73 percent of Lebanon’s 248,000 hectares land under cultivation by 195,000 farms were smaller than one hectare.
In policy assumptions and evaluations of Lebanese agriculture in the 2004 paper and also in papers published in the intervening years up to the 2020 crisis, the analysis and recommendations based on the sector’s fragmented structure tended to focus on factors that are commonly associated with specialization, intensification and corporatization of agriculture. A 2018 brief by World Bank experts on agricultural developments in Jordan and Lebanon, for example, in the seeming approval attributed agricultural output growth in both countries to “increasing labor and land productivity as well as use of chemical fertilizers.” Similarly, Lebanon’s National Agricultural Strategy for 2020 to 2025 advocates as first point among four in the second pillar of its five-pillar approach to “increase agricultural production.”
From the perspective of changing priorities, papers advocating Lebanese agricultural development while combining data on the persistence of baseline scenarios that do not change with advice that reminisces of the old agricultural priorities of economies of scale, speak to the need for policy change at all levels of government. It is a reminder of the eternal story that the most detailed studies, exhaustive special reports, and politically correct strategies are nothing but refuse after their shelf life has expired without their insights having been heeded and translated into action.
A large organic niche, plus goat economy and cider culture
The second area worth pondering on the future of Lebanese agriculture in conjunction with strategic changes and new entrepreneurial impulses is hopeful and totally tangible. It concerns viable new niches which are distinct from the hypothetical recreational cannabis niche in being less obvious in growth potential, but positively nutritional and legal.
These unconventional new paths to growth include ones that are based on circular economy wisdom of generating valuable resources out of residues such as olive pulp and grape pomace, producing energy from biomass – organic matter used as fuel – and employing principles of agroecology (see expert contributions in the special report on food security) and have been pioneered by scientists and civil society “pathfinders”. But these paths run parallel to commercially discovered trails which have been explored by innovative producers who have been venturing forward along contrarian routes in the agro-food sector.
Perhaps the broadest of these commercially explored trails in Lebanon is that of organic agriculture. It is especially suited for a country where past certainties on the availability of subsidized electricity, fuel, and water, as well as the heavy reliance on imported chemical fertilizer have turned into substantial problems. “Organic farming relies on using fewer external resources, so less electricity and water and less inputs and raw material in the production process. Instead of fertilizers we use our own composting and instead of propagation we use our own propagation,” Mario Massoud, executive manager of the Lebanese agriculture sector enterprise Biomass, tells Executive.
When the family venture in 2010 transformed into a commercial enterprise seeking to bring organic products to the domestic market, its business mantra was that Lebanon makes for an interesting country to practice organic agriculture in. These reasons, as cited by Massoud, started with the territory’s well-known characteristics of 300 days of sun per year, by comparison to regional peers’ excellent access to water, and 18 microclimates and crop production windows.
After eight years of building up the business, the production company operated three fully owned farms and worked with 55 partner farms that had dedicated themselves to organic farming standards. This enterprise structure changed during the crisis years whereby the number of owned farms grew to 15, and the number of partner farms dropped to 35 at time of this report. At the same time, the impact of the crisis narrowed the cost disadvantage that its branded and packaged produce and processed foodstuffs had versus conventional produce and products.
“Somehow, organic became more competitive [in comparison with] conventional farming, because it uses less imported inputs and raw materials,” Massoud says, though he laments that due to the crisis, the costs of storing fruits, such as apples, from the 2022 harvest would in some cases exceed the prices that these fruits would fetch in the market. Likewise, the cost of the box which Biomass branded fruits and vegetables are sold in has been thrown out of whack in relation to its contents.
In terms of the structural change of the Biomass operation, which was driven in a large part by the fact that many farming partners sold their equipment during the crisis, Massoud reveals that the shift towards owned farms came with a loss of production. “We used to cover about one million square meters, [or] 100 hectares, of organic farming with our farming partners. We took more farms, but we lost farming partners and today we cover 40 hectares. The farms that we took, are smaller in scale,” he explains.
On the positive side, Massoud says that the crisis has emboldened the organic orientation of Biomass and led the company to assess the total market potential of domestic consumption and exports as strong enough to turn more farms into organic operations with full certification and standards. According to him, the target size for production is now 5 million square meters, or 500 hectares.
However, in his view, neither the organic niche nor conventional farming will be able to accomplish a full or large-scale substitution of food imports. But after decades of underinvestment, organic farming is Massoud’s hope for a new start out of the country’s economic crisis. “What we are trying to do as a company, is to modernize the farming approach and to promote sustainable farming techniques in Lebanon because we believe in this concept and also believe in the commercial potential of doing this.”
Besides the promises of wildly fashionable niches that are linked to developed markets’ buzzwords, such as bio and weed, some hitherto neglected native niches of Lebanese agriculture also correlate well with the demand trends and quality requirements of the developed world.
One such specialty sub-sector of the dairy economy is the goat economy of Lebanon, as promoted by Andre and Joelle Hajjar, siblings who invested in their family’s Go Baladi production of goat milk cheeses and yogurts. When the family enterprise was set up in 2015 in a father, daughter, and son collaboration, the rationale was to substitute goat milk for cow milk because of the human health advantages of goat milk. What sets Go Baladi – the brand is a clever play on words – apart in operational terms is its sustainability focus in sourcing milk from smallholder goat herders who graze their herds in rural areas, such as the Chouf mountains and the Bekaa valley.
The company behind Go Baladi – Hajjar Foods – does not own farms and does not rely on imported goat stock, and its cooperation with herders of free grazing and migratory flocks means that the venture is faced with a reduced need for imports such as feeds, CEO Andre Hajjar tells Executive. “I consider goat milk to be part of the traditional wealth of Lebanon,” he enthuses.
As with all things agriculture in Lebanon, needed imports and absent state incentives stand as barriers against improving the goat economy. However, on the upside, Hajjar points to marketing potentials of high-quality goat milk products in Arab countries where free grazing of herds is not possible. He envisions that up to one million goats could be kept in wandering flocks in rural Lebanon, which would signify a more than 100 percent growth potential of the goat population, as estimated in studies.
Go Baladi, which halted their formal marketing activities in 2019, faces the usual challenges of consumer purchase power limitations that are juxtaposed with unpredictable inflation pressures. Hajjar declines disclosing initial investment and current financial results of the privately held company, but says that against the environment of a sector where large dairy companies are shrinking, Go Baladi never stopped growing in economic terms. At the start of its operation, the venture received foreign development agencies’ advisory and funding support.
Yet another lifestyle, healthy drink and tart taste trend that has contributed to the niche diversity of Lebanese agriculture is Wata, a pioneering apple cider made from fresh fruits and a rural production. Founder Soha Frem started her cidery not as an entrepreneur who ran the gamut of incubator or accelerator, seed funding or angel funding, but as someone who ventured out with her own savings and her husband’s operational management support and orchard in the coastal hills of the Keserwan district of Lebanon.
Frem tells Executive that at the time of starting her cidery in 2019 – two months before the civil protests of that October – there was no real sense of a cider product in the Lebanese market, to the point that it was not and still is not quite possible to define the addressable market for these healthier ciders as alternatives to other beverages, because the cider market in Lebanon is new. She says that Wata, due to minimal competition by imported ciders, started out with a quasi-monopoly on the market, and continues holding this advantaged position until today. But what really mattered to her was the fact that Wata worked toward creating a cider culture in Lebanon, and “being able to introduce a new experience to Lebanese daily life.”
As to Wata’s organic limits to growth, she explains that cider shares many of the same barriers that inhibit mass production in other agro-food segments. Agricultural producers are able to generate high quality products “but in order to be competitive, we need to produce mass products,” she says, adding that comparative advantages in term of production cost are currently near impossible to realize due to the agricultural sector’s lack of infrastructure, the cost of water and energy.
Other restraints against upscaling of production are the need to import nearly all inputs. In th case of Wata, this is yeast, yeast nutrients, caps, bottles, labels, and all packaging materials; only the apples are sourced locally. But essentially it is the quality focus and method of Wata’s production that prohibits outputting cider in mass, something that can be easily achieved with ciders produced from concentrate. “Cider produced from fresh apples will never be a mass product, because production is expensive,” she says.
Conceding Wata’s admittedly limited experience in exports, Lebanese cider has a very good export potential, she says. “We started exporting to Norway, Switzerland, and Paris, [France]. And what I have seen is that markets that are interested are high-end markets that are looking for quality, looking for craft ciders, and for stories behind the product. They are looking for brands that are really taking care of their fruits and we tick those boxes,” Frem says.
In economic literature, economies of scope in an agricultural enterprise are described as emerging when the farmer or agro-entrepreneur uses the same inputs in two or more products, and thereby lowers the cost of their production. Under this approach, farm diversification has been established as a path to reduce market risk and also to improve resources usage at the farm. The logic of agrarian economies of scale mandates investments in infrastructure and centralized marketing structures as tools in creating competitive advantages. The logic of agrarian economies of scope is to reduce food loss, produce better quality, with more care, price in costs, and invest into more diversity and quality, which raises the value of products.
Applying economies-of-scale strategies, it is beyond obvious that investment in water, electricity, transport, and specialized agriculture sector infrastructures are vital for improving food security and improving the economic performance of rural Lebanon. Shorter food supply chains, making and marketing of high value-added products, and economic and social network building and clustering are global winners that combine organically and optimally with investments in modest economies of scale.
By adding in an equal or larger emphasis on economies-of-scope practices, can the Lebanese agricultural constituency elevate itself into a nationwide integrated economic ecosystem of newly invigorated agro-entrepreneurship, family enterprises with niche expertise, and perhaps even corporate players with a sustainability focus? It may be a very worthwhile direction for a small, intense, and diverse agro-food ecosystem.
