Country Focus: Algeria

by Melissa Alexander
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Algeria’s total farm area is estimated at 40.6 million hectares, but of that total, only 7.5 million form part of the fertile region known as the "Useful Agricultural Area." And in that region, the country’s agriculture is highly dependent on climatic conditions, which have a substantial impact on the annual harvest.

For example, in the 1996 season, which enjoyed favorable weather, Algeria harvested nearly twice the wheat crop as in the previous year. But in 1997, which featured the worst climatic conditions of the decade, the wheat harvest was down by nearly 80%.

In addition to the potential for adverse weather, a lack of public and private agricultural investment also dampens productivity, particularly in the cereals sector. Currently, government support represents only 4.5% of total farm income.

Problems include a low level of mechanization, under-use of chemicals and fertilizers, and a poor cropping and crop rotation system. For example, mechanization in the farm sector stands at about 0.01 tractors per hectare and 0.03 combines per harvested hectare.

Converting Algeria’s agri-food industry from traditional farming to modern agriculture has been described by the National Economic and Social Council as a "very sensitive and very slow process." But in the past few years, the Agriculture Ministry has instituted a whole range of reforms as outlined in the new National Plan of Agricultural Development (PNDA).

The PNDA includes a number of general reforms, such as improved financing, programs to give farmland to unemployed youth in arid regions, as well as specific objectives that will affect grains production. The government’s goals are to increase productivity and better manage occasions of drought.

The PNDA envisions focusing grains production in the most productive regions, located in the east, and hopes to increase yields in those regions. In the western regions, such as Ain Temouchent and Mascara, the government is embarking on an ambitious plan of farmland conversion.

There, the aim is to replace low cereals production potential with traditional crops, such as fruit trees and vineyards. If the plan is successful in increasing yields in the east, the decrease in area planted to cereals in the west should not result in significant changes to production or import levels.

Some new mechanisms for financing these agricultural projects were introduced through a new guarantee fund, the National Fund for Regulation and Agricultural Development. In addition, the National Office of Agricultural Insurance (CNMA) started allocating credits in August 2000, with the government financing 70% and regional offices 30%.

Algeria has had mixed results with investment in irrigation to improve agricultural output. But earlier this year, Algeria received a 31-million-dinar soft loan (U.S.$100 million) from the Arab Fund for Economic and Social Development to help finance a water project.

The loan will partly finance the first phase of a project to pump and transport water from the country’s Beni Haroun dam to irrigate agricultural projects in northeastern provinces and to supply drinking water. The 22-year loan, including a six-year grace period, carries a 4.5 percent annual interest rate.

 

WHEAT AND FLOUR MILLING. Wheat generally represents about 58% of planted cereals area and about 61% of Algeria’s total cereals production. Barley accounts for nearly all the remaining area and output, as production of oats and maize is marginal.

Durum wheat takes up about 70% of the total wheat area and 72% of production. Wheat yields are usually higher than barley or other crops because of the greater amount of attention.

Algeria’s annual per capita grain consumption is about 200 kg, with wheat accounting for 75% of the total, barley accounting for 13% and maize making up 12%. Barley is mainly used for feed, although rural residents also consume it as food.

Wheat is primarily consumed in the form of bread and couscous made from semolina, with durum mainly milled for semolina, pasta and couscous. Soft wheat is mainly milled as wheat flour for bread production.

The Algerian wheat milling industry is dominated by ERIAD, a state-controlled joint stock enterprise that continues to account for about 90% of national flour production. Over the past few years, the private sector has expanded its milling capacities, with about 80 operational private millers throughout the country and more preparing to start operation.

Some ERIAD facilities also are slated for privatization, while one subsidiary, ERIAD-Setif, already has opened itself to private investment. Still others are seeking private partnerships for expansion, but the privatization process remains slow.

Currently, ERIAD includes seven milling subsidiary companies around the country that together grind about 4,000 tonnes of wheat per day. Product output from that grind consists of about 2,200 tonnes of semolina and 870 tonnes of flour per day. At least one milling subsidiary complex, Mills of the High Plateau, includes pasta and couscous factories.

Wheat import needs vary from year to year based on the success of the harvest. But regardless of harvest results, Algeria is dependent on imports to meet its consumption needs.

Algeria has long held a policy of buying the cheapest wheat on the market, largely because of a lack of private capital and government dominance in the wheat industry. The OAIC (Office Algerian Interprofessional de Cereales) traditionally held monopoly control over the wheat importing and processing sectors.

Algeria began allowing private imports in July 1995, but actual private-sector imports were not undertaken until July 1998. Even with that breakthrough, OAIC has continued to dominate; of the 14 million tonnes of wheat imported in the 1998-99 through 2000-01 marketing years, private imports from two buyers — one in the west, another in the east — accounted for only 2 million tonnes.

But the pace of non-OAIC importing may pick up. Reports indicate ERIAD, which typically buys 4 million to 4.5 million tones of cereals each year from OAIC, has established an independent cereals importing pool to purchase up to 25% of its needs directly from international grain houses.

Much of this change in approach was spurred by action taken by OAIC earlier this year to hike prices for wheat sold on the domestic market. In January, OAIC announced a 20% price hike in "common," or soft wheat, and a 13% increase in durum.

"High prices billed by OAIC made it necessary to import by ourselves to make our products more competitive in the local market," an ERIAD official said in April.

According to the ERIAD official, the increases resulted in domestic wheat prices that were about U.S.$13 to U.S.$22 per tonne higher than wheat purchased from other import sources. Another difficulty was that prices for flour, as well as for semolina and couscous at the retail level, remain fixed by the government, which meant that millers would be operating at a loss if they paid the OAIC price for the wheat.

 

COARSE GRAINS AND FEED. Barley is Algeria’s second most important crop, but just as with wheat, the country is unable to produce enough to meet domestic consumption needs and must rely on imports.

Beginning in 1997, barley imports were opened to the private sector, and purchases since then have boomed. From a relatively modest import level of about 34,000 tonnes in 1995-96, barley imports have soared to as high as 900,000 tonnes in 2000-01.

Barley is generally imported in small shipments from European countries. The main suppliers in 2000 were Russia, France, Germany and the United Kingdom.

Algeria does not produce any significant quantities of maize and relies on imports to meet its need for this product. This commodity is mainly imported by the state-run Office National des Aliments du Betail (ONAB) and is consumed primarily by the poultry sector.

ONAB produces 1.3 million tonnes of processed animal foods each year, and its various layers of activity are responsible for the production of 34 million eggs for hatching, 11 million chicks and 10 million chickens. The agency operates 15 abattoirs and produces poultry for consumption.

 

TRADE. Algeria is not a member of the World Trade Organization, although a WTO working party met for the first time in April 1998. Topics under discussion by the working party include agriculture, the customs system, state trading, transparency and legal reform. Initial contacts on market access in goods have taken place, but conditions and terms of entry have not been discussed.

Algeria imposes import duties on most grains and grain products, with the amount varying depending on import needs and the specific domestic industry involved. For example, the import duty on wheat and barley is 5%, and both are exempt from the VAT. Maize duties also stand at 5% with a 7% VAT.

Custom duties on flour and semolina, on the other hand, stand at 45%, a level that makes import of those products prohibitively expensive.

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