Focus on Algeria

by Melissa Alexander
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Algeria moves slowly towards modernizing its agriculture sector.

by Mario Sequeira

Eighty percent of Algeria’s 238 million hectares is made up of desert. Just 3%, or about 8 million ha, is arable and most of this is in the northern fertile coastal strip known as the Tell.

This strip, stretching west to east across the country, gets annual rainfall of 600 to 1,000 millimeters and includes most of Algeria’s cities and population.

It is also where most of the country’s farming takes place, with the rest occurring south of the Tell, where rainfall can be up to 400 millimeters and in the other parts of the country where irrigation has been set up.

The country is subject to erratic weather patterns, including unreliable rainfall, floods and drought, resulting in big swings in agricultural production. The agriculture sector accounts for 10 to 11% of gross domestic product and employs about 15% of the labor force. In comparison, industry contributes 57% and services 32%.

The oil and gas sector is the backbone of the economy, accounting for 60% of national revenue, 30% of GDP and 97% of exports.

Algeria’s main crops are durum and bread wheat, barley, oats, citrus fruit, wine grapes, olives, tobacco, figs and dates. It is an exporter of dates, olives, olive oil and grapes.

Agriculture has been controlled by the government since the country gained its independence in 1962. Since then, the strings had been gradually loosened in an effort to shift farming from its traditional roots to a more modern, productive system.

In the 1990s, significant reforms began to address agricultural productivity issues such as land ownership, mechanization, chemical and fertilizer use and agronomy. Many of these reforms were included in a National Plan of Agricultural Development (PNDA).

Among the targets the PNDA set were converting more land to agriculture, optimizing grain production in the regions that had the best conditions, such as good soil and rainfall, and increasing area planted to traditional crops, such as grapes and olives, in less productive areas.

Arable land belonging to the state has been divided into about 1 million farms and small holdings and sold to private farmers. The plan also granted land to unemployed youth in arid regions that they could purchase after five years of farming.

It introduced new financing mechanisms for agricultural projects, including the National Fund for Regulation and Agricultural Development. In 2000, the National Office of Agricultural Insurance (CNMA) started allocating credits.

In April 2001, the government announced a U.S.$7.2 billion program to stimulate the economy. Agriculture was allocated U.S.$900 million of this package.

The goals of this investment were to:

• Create 500,000 more jobs in agriculture;
• Achieve a growth rate of 10%;
• Expand cultivatable land by an additional 700,000 hectares;
• Increase irrigated land by 200,000 hectares; and
• Increase area planted to fruit trees, forests and pastures by 500,000 hectares.

While grain production has been increasing, the country is still a long way from being able to meet domestic needs. Grain production for the period 2000-04 averaged 2.7 million tonnes a year, with a high of 4 million tonnes reached in 2003-04. Annual grain consumption is around 8 million tonnes.

Another side of the reform process has focused on structural liberalization and privatization of agriculture. The sector has been dominated by state-owned enterprises.

One of these is ERIAD, a huge flour milling and baking company that has a giant share of the flour production market. Another is the Office Algerien Interprofessionnel des Cereals (OAIC), another big government organization with, until a few years ago, monopoly power to import cereals.

The government has closed, merged or restructured small and medium-sized companies to make them competitive and more attractive to buyers.

As local private investment has increased, the private sector has taken a significant share of the market. In 2001, nearly 65% of agricultural imports were carried out by the private sector.

OAIC has seen its role diminished slightly after the market was deregulated. Although OAIC still accounts for significant share of imports, the private sector is increasing its share.

Similarly, there are now more private mills in the country than before, posing a competitive challenge to ERIAD.

WHEAT AND FLOUR MILLING
Durum and soft wheat are the dominant cereal crops, accounting for 60 to 65% of cereal area planted. In the 2004-05 crop year (September to June), 42% of the cereal area planted was to durum, 23% to soft wheat, 33% to barley and 2% to oats.

Observers have slashed the 2004-05 cereal crop harvest to about 2.5 million tonnes, compared to 4.1 million tonnes last year. After a late start, the country suffered unusually cold winter conditions and continuing dry weather.

Durum wheat is a staple in North Africa, where it is consumed as couscous, a traditional semolina-based dish, and as bread. Durum is mainly milled for semolina, pasta and couscous. Soft wheat is mainly milled as wheat flour for bread production.

Algeria’s cereal production is not enough to meet domestic needs. The country imports an average of about 4 to 5 million tonnes a year. With the harvest now estimated to be lower than expected, imports in 2005-06 are set to reach 6 million tonnes, surpassing the 2004-05 total of nearly 5 million tonnes.

Algeria buys most of its durum wheat from France, Canada, the U.S. and Argentina. Algeria buys most of its soft wheat from France, Russia, Argentina and Ukraine.

About 70% of the wheat is purchased by the OAIC. Since the privatization of the wheat industry in 1998, private importers have slowly entered the market, and 10 private companies now command 30% of the wheat import market share.

Wheat consumption is expected to remain relatively stable despite last year’s bakers’ strike, which occurred when the government decided not to raise the price of bread and flour. Bread prices are fixed by the government and have not gone up since 1996, despite increases in the prices of inputs and overheads.

Despite privatization, the state-owned ERIAD dominates flour production with about 90% of the market. However, there are now 259 private mills operating in addition to 98 government mills.

LIVESTOCK AND FEED
Since gaining its independence, Algeria’s livestock production has received the least support of all sectors in the development plans implemented. Efforts have gone mainly towards expanding poultry production.

Sheep make up the biggest category in the livestock sector, followed by cattle and goats. Production systems vary widely, ranging from a few intensive holdings to extensive nomadic systems with low productivity. While the intensive operations rely on hay, feed crops, crop by-products and feed supplements, nomadic herds feed on what vegetation is available, including forage crops.

Feed crops consumed in the livestock sector include barley and maize. In the past two years, the barley harvest has been good, resulting in lower imports.

Maize production is negligible and imports have averaged close to 2 million tonnes during the past three years.

Barley is generally exclusively imported in small shipments by private importers from Europe and Eastern Europe because of the proximity and low freight costs. The main suppliers are Romania, Ukraine, Russia, Spain and France.

In the past two years, maize has been the less expensive feed grain on the world market, resulting in large amounts of imports. Imports in 2004-05 are estimated to be 1.8 million tonnes, slightly lower than the 1.9 million tonnes imported in 2003-04.

Maize imports have increased to also supply an expanding feed manufacturing industry.

In 2004, the government announced a U.S.$10 million credit program to finance investment in the animal feed manufacture and storage industry. The industry is expected to take up this offer and expand operations, which in turn is expected to result in larger maize imports.

The U.S. remains the biggest supplier of maize to Algeria, followed by Argentina. Feed grain imports are carried out by the government-owned National Office for Livestock Feed (ONAB). In June 2004, an ONAB team visited the U.S. and discussed how the U.S. could help with privatization of the company’s feed mills and poultry production units.

ONAB, which imports up to 50% of feed grain, owns and operates 24 feed mills and 15 slaughterhouses.

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