With its fertile soil and relatively high levels of rainfall, Yemen possesses the best climatic conditions for general agriculture on the Arabian peninsula. But drought in some places, floods in others and general water shortages remain serious problems.

Yemen’s arable land area is estimated at 1.6 million hectares, of which 1.2 million hectares, or 2% of the country, is actually worked. Because of its mountainous nature, terrace agriculture is common practice.

The main crops are sorghum, wheat, barley, maize, millet, sesame, cotton, coffee, vegetables, dates, fruit, qat and tobacco. Grain imports are required, as cereal yields are low and the climate is more suitable for fruit production.

The domestic market is dominated by the cultivation of qat, a widely used mild narcotic shrub. It is estimated that qat occupies 60% of total area and up to 25% of irrigated land.

Qat generates value-added revenues equivalent to about 25% of gross domestic product and is a large source of revenue for many farmers. But qat cannot be exported to earn foreign exchange needed for grain and other basic food imports.

Qat production also contributes to Yemen’s water woes. A report in 1998 highlighted the serious problem of water shortages, based on population increases and qat production, and studies show that water use in the city of Sana’a is 30 million cubic meters, while qat takes 60 million.

The dominance of qat has contributed to concerns about food security. Yemen in 1998 was estimated to have spent 54% of its oil revenues on imported foodstuffs.

A study released earlier this year, conducted by Yemen’s former Agricultural Minister Nasser Abdullah al-Awalki, highlighted official concerns. With a 3.7% annual growth rate, Yemen’s population will rise to 27.5 million by 2010, thus requiring no less than 8 million tonnes of grain annually, the study said.

The study proposed the adoption of a strategy to raise agricultural productivity, regulate farmland, turn 100,000 hectares of qat areas into cereal production and introduce state-of-the-art technologies to farming and marketing to solve the grain problem.

Through the Farming and Fisheries Fund, the government also has established programs to support production, provide financial assistance and set up other support projects. The fund also has financed businesses in the fields of farming and livestock, refrigerated trucks, marketing centers and warehouses.

Yemen also is receiving specific assistance from France. In February, the two countries signed a protocol on the mechanism of French funding for food assistance in 2001.

The amount of assistance was estimated at 140 million Yemeni rials (U.S.$830,000) allocated for financing a number of agricultural development projects. The majority of the projects are related to the irrigation sector and are specified for building dams and reservoirs for the purpose of irrigating planted areas.

WHEAT AND FLOUR MILLING. Government subsidies on wheat, wheat flour and other services were gradually reduced through the 1990s in line with agreements negotiated with the International Monetary Fund and the World Bank. Then, in early 1999, the government privatized wheat imports and eliminated all consumer subsidies on imported wheat. Privatization of wheat flour imports and liberalized, non-subsidized flour markets followed four months later.

With liberalization and the elimination of subsidies at the consumer level, prices of wheat and wheat flour increased considerably, by as much as 40%. Even though the Ministry of Supply and Trade continued to oversee distribution of flour purchased under government tenders before liberalization, retail flour prices immediately reflected market conditions.

Upon liberalization, Yemeni bakers also were no longer subject to quotas and paid market prices for wheat flour. Subsequently, bread prices increased by as much as 400%.

The development of free markets for wheat and flour sparked a major move toward expansion of Yemen’s flour milling industry. Before the liberalization, the country was home to only one commercial flour mill, the privately owned Red Sea Flour Mills at Hodeidah that consistently ran well below capacity.

The Red Sea mill began operations in 1985 with a 520-tonne daily capacity, and expansion brought the mill’s daily capacity to a 1997 level of about 1,900 tonnes of wheat. Recently, capacity was reported at 1,920 tonnes, and the mill reportedly was running at full capacity.

Several new mills subsequently have been developed. A flour mill built in Aden Port by the Hayel Saeed Group began operations in December 1999. Initial capacity of this mill was 1,500 tonnes per day.

The Aden mill is located about 1 km from the quay, and a conveyer belt system was built to transport wheat directly from ship to the mill. The Hayel Saeed Group reportedly also plans to expand capacity of the mill to 2,500 tonnes per day in 2002.

The Al Habbari Company, a well-established Yemeni grain importer, also built a 600 tonne-per-day mill adjacent to a new 400-meter quay at the port of Salif. The mill’s bagging station can pack 4,800 tonnes per hour.

Salif, located about 90 km north of the Red Sea port of Hodeidah, historically was a small port, but in 1999, a 13,000 square km site was set aside for a U.S.$40 million port improvement project by Yemen International Food Industries (YIFICO).

The project included the quay, which can accommodate vessels of up to 70,000 tonnes, and 21 silo bins with a capacity of 120,000 tonnes. The discharge capacity from ships to the silos is 600 tonnes an hour.

Overall, the market for wheat in Yemen is expected to remain strong over the next several years, especially given population growth and the difficulties of expanding domestic wheat production. Wheat flour imports, not surprisingly, have sagged with the addition of more domestic milling capacity.

Yemen in 1998 was the world’s largest flour importer, taking nearly 1.1 million tonnes, according to the International Grains Council. In 2000-01, the Council projected Yemen’s imports had declined to 650,000 tonnes.

Popular flour products include a 25-cm loaf of leavened bread, as well as longer and fatter baguettes. According to bakers, between 400 and 500 loaves of this bread can be made with one 50-kg bag of flour.

Bakers also offer flat unleavened traditional bread to consumers. One bag of flour can produce about 600 loaves of this bread.

COARSE GRAINS AND FEED. Feed use centers on the poultry sector, with broilers and table eggs the primary end products.

Table egg output has increased significantly in recent years causing prices to fall and forcing some producers to fold. In contrast, broiler production has fallen steadily since the early 1990’s, stemming from low profit margins. To make up for the shortfall in locally produced broilers, imports of frozen broilers from France and Brazil have increased significantly.

The overall demand for imported maize and soybean meal by the Yemeni poultry sector has risen substantially over the past few years based on the surge in table egg production. Poultry companies import about 150,000 tonnes of coarse grains each year, primarily from the United States and Argentina, up about 100% in the past decade.

Yemen has about 20 feed mills with a total capacity of about 150 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 Sana’a with a total capacity of 22 tonnes per hour and a third 6-tph feed mill in Taiz.