About 60% of crop production in Yemen is rain fed. Qat, a mild stimulant shrub whose leaves are chewed by the majority of the adult population, accounts for the bulk of agricultural inputs and irrigation, as the value of qat is more than the combined value of all other crops.
Agricultural policy. As part of the assistance package from international lenders, the Yemeni government agreed to begin economic restructuring. Among the World Bank recommendations was the phasing out of consumer wheat and flour subsidies and market liberalization. Although the Ministry of Supply and Trade (M.S.T.) continues to control wheat imports and domestic distribution, reforms have begun.
The subsidy system involves an exchange rate mechanism, whereby Yemeni importers must sell wheat to government agencies or licensed distributors at a fixed exchange rate. In 1996, the rate was about 12 rials per U.S. dollar, or just under 10% of the market exchange rate.
Under the economic restructuring program, the 1997 fixed rate was increased to 30 rials, or about 25% of the market rate. Over time, the fixed rate gradually will be increased to market levels and then be allowed to fluctuate with the market.
The reform program also included a change in wheat procurement procedures. Previously, licensed private importers purchased wheat and arranged shipment using their own credit, with the government negotiating its purchases with individual importers. The importers then were reimbursed in U.S. dollars six months or more after the contracts were concluded.
With the change, the government now issues a tender based on predetermined quality specifications, arrival schedules and port destinations. Transactions are financed through letters of credit issued by the Central Bank of Yemen to the wheat supplier, with the local importer receiving a commission from the supplier and payment in rials from the M.S.T. to organize domestic sales.
The new system is expected to open up the market to new private wheat traders, who previously had to rely on their own capital or credit to participate. Currently, about 15 companies, government and private, are licensed to import wheat, although only the private companies have been active in recent years.
The M.S.T. also is involved in distributing wheat and flour, which arrive at either the port of Hodeidah or Aden. The grain or flour is sold by the importer to one of seven distributors, each of which is assigned a geographical supply district. The distributors are either government-owned corporations or licensed private companies, which were not allowed to participate in the distribution market until 1996.
The distributors are responsible for transporting wheat or flour, which is bagged in 50 kg sacks, to their respective districts for sale at a fixed price to warehouses, which are managed by the government corporations. All transport is by privately owned trucks.
Consumers then buy product from warehouses at a fixed price, currently set at the equivalent of about U.S.$5 per sack for wheat, or roughly U.S.$100 a tonne. At least 50% of the population buys bagged wheat, which subsequently is milled in small milling shops throughout the country.
Flour milling and baking. Yemen currently has only one significant industrial mill, the Red Sea Flour Mills Co., Ltd., a privately owned facility near Hodeidah. Another 1,500-tonne private facility in Aden is in the design stages.
The Red Sea mill began operations in 1985 with a 520-tonne daily capacity, and expansion brought the mill's daily capacity to the current level of about 1,900 tonnes of wheat. But the mill reportedly operates at only about 80% of capacity, as frequent outages of government subsidized power curtail run times.
The Red Sea mill is located 25 km from the port of Hodeidah and grinds imported wheat, mostly of U.S. and Australian origin, although India was a major supplier in calendar 1996. The company owns its own shipunloaders and a fleet of 20 trucks, enabling wheat to be discharged and delivered to the mill directly from the ship.
Virtually all flour produced is 72% extraction, which is preferred for home baking of "khubz," the traditional bread, as well as by bakers. Small amounts of non-durum semolina also are produced for Yemen's two pasta plants.
The mill bags all of its flour in 50 kg sacks and sells it to one of four government corporations, who then transport it by truck to warehouses for distribution to bakeries. The fixed wholesale flour price is the equivalent of about U.S.$5 a bag. The government also buys bran from the mill at a fixed price equivalent to about U.S.$7.40 per 50 kg.
No data are available on the country's total number of bakeries, although Sanaa, the capital, has 421 small to medium-size operations (a medium-size bakery uses about 20 to 30 bags of flour per day). Bakers in Sanaa are members of the Bakers Union, which procures flour from the government corporations and arranges transport to the bakeries. The delivered flour price is fixed at the equivalent of about U.S.$6.
The government assigns weekly flour quotas for each bakery, but many require more than the allotted amount. A significant percentage of flour ends up on the black market, and bakers who need more than their quota must pay prices as high or higher than 1,200 rials a bag, or about U.S.$9, to assure adequate supplies.
Feed. Feed use centers on the poultry sector, with broilers and table eggs the primary end products. Feed ingredients, including maize and soybean meal, are imported by the private sector, with the U.S., South America and India primary sources. Poultry companies, who import a total of about 120,000 tonnes of grain annually, have formed into import groups to obtain economies of scale.
Eight companies dominate the commercial broiler industry, accounting for more than three-fourths of commercial marketing in 1995. Broilers are marketed as live chickens, as Yemen currently has no processing plants.
Yemen has 22 feed mills with a total capacity of 143.5 tonnes per hour that account for about 90% of the country's total feed milling capacity.
The largest commercial broiler company operates two feed mills in Sanaa with a total capacity of 22 tonnes per hour and a third six-tph feed mill in Taiz.