Marketing Study for Olive Oil and Apple in Lebanon 2007-GTFS-REM-070-ITA

Republic of Lebanon Regional Integrated Pest Management Ministry of Agriculture (IPM) Programme in the Near East

Marketing Study for Olive, Olive Oil and Apple in Lebanon

Prepared by: Amal Salibi

(Agricultural Economist)

June, 2007

Beirut – Lebanon


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Acknowledgments I would like to express my gratitude and appreciation to the Regional Director and National Coordinator of the Regional IPM Project for their direction and support. I would also like to thank the regional facilitators of the Farmers Field Schools, as well as the farmers participating to the FFS for their collaboration and valuable suggestions that helped in conducting this work.


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CONTENTS

LIST OF TABLES.........................................................................................................................4 I. INTRODUCTION .....................................................................................................................6 II. ANALYSIS OF THE EVOLUTION TREND OF PRODUCTION OF OLIVE, OLIVE OIL AND APPLE..........................................................................................................................7

1. Olive and olive oil production in Lebanon (area, production volume and value, yield…).....7 2. Apple production in Lebanon (area, production volume and value, yield…).........................8

III. ANALYSIS OF THE EVOLUTION TRENDS OF EXPORTS/IMPORTS OF OLIVE, OLIVE OIL AND APPLE (VALUE AND VOLUME), EXPORT MARKETS…..................9

1. Olive and olive oil exports and imports (value, volume, main export/import markets…) .....9 2. Apple exports and imports (value, volume, main export/import markets…) .......................11

IV. IDENTIFICATION AND ANALYSIS OF THE MARKET STRUCTURE...................13 V. STUDY OF THE MARKETING INFRASTRUCTURE INCLUDING STORAGE, PROCESSING, TRANSPORTATION… .................................................................................15 VI. STUDY OF THE PRICING MECHANISMS....................................................................16 VII. ANALYSIS OF THE SUPPORT POLICIES AND THE ROLE OF THE GOVERNMENT IN MARKETING AND MARKETS OF THE SELECTED CROPS......18

1. Bi-lateral and multi-lateral agricultural trade agreements.....................................................19 2. Agricultural export subsidies.................................................................................................21 3. On-going agricultural programs and projects........................................................................23

VIII. PREPARATION OF AN INVENTORY OF QUALITY AND STANDARD CRITERIA EXISTING ON THE SELECTED CROPS .........................................................23

1- LIBNOR standards................................................................................................................24 2- Lebanese import/export regulations......................................................................................25 3- EU/UNECE standards...........................................................................................................25 4- Private standards (GFSI, EUREP, APS…)...........................................................................27

IX. IDENTIFICATION OF THE CHALLENGES, OBSTACLES AND OPPORTUNITIES IN THE MARKETING OF THE SELECTED CROPS ACCORDING TO THE FINDINGS OF THE ABOVE STUDIES ..................................................................................27 X. PREPARATION OF A PARTICIPATORY STRATEGY FOR EMPOWERMENT OF THE SELECTED COMMUNITIES AND THE RELEVANT GOVERNMENT AND NON-GOVERNMENT AGENCIES IN MARKETING SAFE PRODUCTS .................................29 LIST OF REFERENCES ...........................................................................................................30


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LIST OF TABLES Table 1. Area, production and production value of olive (1998-2005) ........................................................ 7 Table 2. Area, production and production value of apple (1998-2005) ....................................................... 8 Table 3. Quantity and value of imports/exports of fresh and preserved olives (1998-2006) ....................... 9 Table 4. Quantity and value of imports/exports of virgin and non-virgin olive oil (2003-2006)............... 10 Table 5. Main importing countries of virgin olive oil from Lebanon for the years 2003-2006 ................. 10 Table 6. Main importing countries of non-virgin olive oil from Lebanon for the years 2003-2006 .......... 10 Table 7. Main exporting countries of virgin olive oil to Lebanon for the years 2003-2006 ...................... 11 Table 8. Main exporting countries of non-virgin olive oil to Lebanon for the years 2003-2006 ............... 11 Table 9. Quantity and value of imports/exports of apple (1998-2006) ...................................................... 12 Table 10. Main importing countries of apple from Lebanon for the years 2003-2006 .............................. 12 Table 11. Main exporting countries of apple to Lebanon for the ers 2003-2006 ....................................... 13 Table 12: Yearly average wholesale and retail prices for apple (2002-2006) ............................................ 18 Table 13. Arrangements applicable to imports into the EU of Lebanese olive, olive oil and apple .......... 20 Table 14. Concessions to Lebanese olive, olive oil, and apple from EFTA countries (Switzerland, Norway

and Iceland) ....................................................................................................................................... 21 Table 15. IDAL: Export-Plus agricultural subsidy scheme (USD/ton) ...................................................... 22 Table 16. List of Lebanese standards issued on olive, olive oil and apple and other related general

standards ............................................................................................................................................ 24 Table 17. Some general regulations for export/import of fruit products administered by MOA ............... 25 Table 18. List of international and multinational standards issued on olive, olive oil and apple and other

related general standards.................................................................................................................... 26


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List of Abbreviations and Acronyms APS - Assured Produce Scheme CAC - Codex Alimentarius Commission CAS - Central Administration of Statistics EFTA - European Free Trade Association EU - European Union EUREP - European Retailer Produce Working Group FAO - Food and Agriculture Organization of the United Nations GAFTA - Greater Arab Free Trade Area GAP - Good Agriculture Practices GCC - Gulf Cooperation Council GDP - Gross Domestic Product GFSI - Global Food Safety Initiative GI - Geographical Indications IDAL - Investment Development Authority of Lebanon IOOC - International Olive Oil Council IPM - Integrated Pest Management IPPC - International Plant Protection Convention LARI - Lebanese Agricultural Research Institute LBP - Lebanese Pounds LIBNOR - Lebanese Standards Institution MOA - Ministry of Agriculture MOE - Ministry of Environment MRL - Maximum Residues Level NGO - Non-Governmental Organization QS - Quality and Safety SME - Small to Medium Enterprises TCP - Technical Cooperation Programme UAE - United Arab Emirates UNECE - United Nations Economics Commission for Europe UNEP - United Nations Environmental Program UK - United Kingdom US - United States USAID - United States Agency for International Development WTO - World Trade Organization


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I. INTRODUCTION Lebanese agriculture accounts for 5.5% of the Gross Domestic Product (GDP)1 and employs 7.5% of the total labor force2. The contribution of agriculture to the national economy has continuously declined during the last few years. Yet, the agro-processing industry showed a remarkable progression representing more than 5% of total GDP in 2003 (4.1% in 1997). Farming systems in Lebanon are characterized by the prevalence of traditional cropping patterns, and marked by the fragmentation and parceling of the agricultural holdings. The agricultural census (1998) revealed that more than 75% of the total farm holders (195,000 farmers) have an area of less than 1 hectare, and cultivate 20% of the total cropping area. Around 3,100 farm holders with a holding size of more than 10 hectares (1.6%) cultivate around 30% of the total cropping area. According to the last Agricultural Survey conducted in 2005, the total cultivated land area in Lebanon reached 273,000 hectares (27% of the total land area), of which 50% are irrigated. The total value of crop production amounted to 1,441 billions LBP accounting for 72% of the total agricultural production. Fruit trees constitute 44% of the total value of crop production, followed by vegetables (29%), then olives3 (8%), industrial crops (7%), cereals (6%) and leguminous (2%). Agriculture accounts for around 13% of total exports and 15% of total imports (Customs Administration, 2006). In 2006, Lebanon agricultural and food imports amounted to 2,167 billions LBP (31% animal products, 25% plant products, and 37% processed food products), and agricultural exports were valued at 438 billions LBP (4% animal products, 28% plant products, and 64% processed food products). While the total area of fruits reached 75.9 thousands ha with a total production of 954.4 thousands tons, Lebanon imports 12.6 thousand tons each year at an annual cost of 26 billions LBP and exports 272.7 thousand tons with a total value of 57.8 billions LBP. Major fruit exports include apples, banana, grapes, apricots, cherries, citrus fruits. In 2006, over one third of Lebanese agricultural exports were destined to GCC states (Saudi Arabia, Kuwait, Bahrain, Qatar, United Arab Emirates, and Sultanate of Oman). Syria was the largest importer of agricultural and food products in 2006 (with 12.5%) followed by Saudi Arabia (11.2%). Exports to Europe are very limited (around 15% of total agricultural exports in 2006); more than half of agricultural exports destined to Europe went to Germany (4%) and France (3%). The different trade agreements (EU Association Agreement, GAFTA), to which Lebanon is signatory, have a significant impact on trade liberalization. It will become increasingly difficult for Lebanese agriculture to be competitive in the production of traditional crops since other countries in the region have lower costs and subsidized production. At the same time, the opening-up of new markets other than traditional Arab markets is very difficult with the absence of quality norms and products not suitable for such markets.

1 Economic Accounts of Lebanon 2003. 2 The National Survey of Household Living Conditions (2006). 3 The value of olive production varies from year to year due to the alternate bearing nature of the crop (8% in 2005 - a low production year vs. 14% in 2004- a high production year)


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A study on marketing of olive, olive oil and apple in Lebanon was carried out in the framework of the project on “Regional Integrated Pest Management IPM Programme in the Near East”. The purpose of the study is to analyze opportunities and challenges for national and international marketing of three selected products (olive, olive oil and apple) and review market trends, market niches and competition in addition to prevailing conditions concerning product, quality, standards allowing farmers to enter or increase share in major markets. II. ANALYSIS OF THE EVOLUTION TREND OF PRODUCTION OF OLIVE, OLIVE OIL AND APPLE 1. Olive and olive oil production in Lebanon (area, production volume and value, yield…) Olives and olive oil production are one of the most important subsectors of the Lebanese agriculture. In addition of being a traditional product, olive oil production constitutes an important activity of the Lebanese agro-processing sector. According to the last agricultural survey conducted in 2005, olive trees cover more than 21% of the total cultivated area (58.8 thousands hectares) with a total production varying between 70-85 thousands tons (in low production years) vs.165-190 thousands tons (in high production years). The area of olives has continuously increased since 1998 (more than 8 ha in 7 years). The value of olive production amounted to 212.3 billions LBP in 2004 vs. 113.2 billions LBP in 2005 representing 7.9% and 13.7% of the total value of plant production respectively (table 1). More than 56% of the total farm holders are engaged in oleiculture activities (111,000 farmers) with an average holding size of less than 0.5ha for more than 50% of olive farmers. The total number of olive trees is estimated at around 14 million trees (with a plant density of 200-250 trees per ha). The largest cultivated area of olive is concentrated in the North (40%) mainly in the two cazas of Akkar (15%) and Koura (10%), followed by Nabatiyeh (20%), South (18%) with more than 9% in the caza of Sour, then Mount Lebanon (17%) mainly in the Chouf area (9%), and very smaller areas in the Bekaa (5%). Table 1. Area, production and production value of olive (1998-2005)

Year Area (1000 ha)

Production (1000 tons)

Value of production (LBP millions)

1998 50.5 30.3 46,700 1999 51.1 66.4 101,000 2000 55.6 189.5 265,680 2001 56.8 85.8 118,833 2002 57.6 184.4 265,188 2003 57.6 83.2 110,300 2004 58.5 167.3 212,304 2005 58.8 76.5 113,220

Source: Agricultural Surveys 1998- 2005, Ministry of Agriculture and FAO Olive tree cultivation in Lebanon is mainly rainfed where the irrigated area does not exceed 8% of the total olive cultivated area. The production varies widely from year to year, a typical trend of the local olive tree due to the alternate bearing nature of the crop in addition to the current agricultural practices followed by farmers. The average productivity of olive trees is estimated at


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around 3-3.5 tons per ha (high production years) vs. 1.3-1.5 tons per ha (low production years) where the production of non-productive olive trees was accounted for. In addition, the low productivity is mainly due to the high number of old trees (more than 50% in North and Mount Lebanon) and prevailing agricultural practices. The most important olive varieties that are grown in Lebanon are local varieties: Souri, Samakmaki, Airouni, Baladi…New Italian and Spanish varieties of olive trees were recently introduced in the framework of many projects financed by international organizations. More than 70% of the total olive area is destined to olive oil production and the remaining is consumed as table olives. Olive oil residues from the milling process are used for heating; in addition bad quality olive oil is transformed into soap (around 15% of the total olive oil production). Lebanon's production of olive oil was estimated at 11,500 tons in 2005 as compared to 25,000 tons in 2004 (unofficial estimates) with a total value of 60 billions LBP. The transformation rate varies between 20-25% of the total weight of olives. Around 5% of the farmers have a production of 200 kg of olive oil; 80% have a production between 1000-1200 kg; and 15% of the farmers have a production higher than 2500 kg yearly. On the other hand, various soil and climatic conditions along with the different cultural practices and varieties produce special characteristics and tastes for olive oil. 2. Apple production in Lebanon (area, production volume and value, yield…) Apple production is among the most important fruit tree production in Lebanon (ranked second in terms of cultivated area and quantity of fruits produced). The area cultivated with apple (9.4 thousands hectares) covers more than 12% of the total area allocated to fruit crops. Total production of apple registered 115 thousands tons (12% of total fruit production). The value of apple production amounted to 80.3 millions LBP representing around 14% of the total value of fruit production and 6% of the total value of plant production. Table 2. Area, production and production value of apple (1998-2005)

Year Area (1000 ha)

Production (1000 tons)

Value of Production (LBP millions)

1998 9.2 124.2 n.a. 1999 9.3 138.8 n.a. 2000 9.3 126.7 66,517 2001 9.4 112.0 64,960 2002 9.4 150.3 114,618 2003 9.4 152.0 105,032 2004 9.4 113.3 75,798 2005 9.4 114.8 80,360

Source: Agricultural Surveys 1998- 2005, Ministry of Agriculture and FAO Apple production is concentrated in 3 major governorates: (1) North Lebanon (40%): Akkar (13%), Becharre (10%) and Donnieh (8%); (2) Mount Lebanon (33%) mainly Jbeil (14%) and Kesrouan (7%); and (3) the Bekaa area (23%): Baalbeck (13%), Zahle (5%), West Bekaa (5%).


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The average yield of apple trees was estimated at around 12-16 tons per ha where the production of old and non-productive apple trees was accounted for. However, the productivity of productive apple trees in Lebanon is higher when good agricultural practices are followed and with the new cultivated varieties. As shown in table 2, the area of apple has not varied in the last few years; farmers have rather shifted to the replacement of their old apple trees with new varieties with higher production and for which demand is expanding in local as well as regional and international markets. A 35% increase in yield occurred in 2002-2003 (total production exceeding 150 thousands tons a year). The most important apple varieties that are grown in Lebanon are: Golden delicious and its mutants (Smoothe; Lysgolden; Golden Moufti or Golden Anjar or as its characteristics imply Early Gold); Red delicious and its mutants (TopRed Delicious; Early Red One; Starkrimson; Red Chief; Ace; Top Spur); Gala Fuji; Granny Smith; Mouwashah or sans pareille; Reinette de Canada; Amassia. III. ANALYSIS OF THE EVOLUTION TRENDS OF EXPORTS/IMPORTS OF OLIVE, OLIVE OIL AND APPLE (VALUE AND VOLUME), EXPORT MARKETS… 1. Olive and olive oil exports and imports (value, volume, main export/import markets…) Exported quantities of olives (fresh and preserved) are limited varying from year to year: 54 tons in 2004 vs. 22 tons in 2006 with a total value of 167 millions LBP and 54 million LBP respectively (table 3). Few quantities are exported to the United States (4 tons), Sweden (9 tons), Australia (1 ton) and some African countries in addition to some traditional markets (Gulf countries). On the other hand, exports of olive oil constitute around 3.5% of the total value of exported agro-processed products. Lebanon exports yearly 1400-1900 tons of olive oil (of which less than 30% is virgin). In the last few years, the exported quantity of olive oil has increased from 1380 tons in 2003 to 1820 tons in 2006 with a total value of 4.8 billions USD and 9.6 billions USD respectively (table 4). The growing demand of healthy food has allowed Lebanon to increase its exports of olive oil and to enter few niche markets with a large Lebanese Diaspora. Table 3. Quantity and value of imports/exports of fresh and preserved olives (1998-2006)

Year Imports Exports Quantity

(tons) Value

(LBP millions) Quantity

(tons) Value

(LBP millions) 1998 3 2 43 79 1999 23 15 13 21 2000 33 22 45 60 2001 0 0 45 87 2002 70 86 19 40 2003 435 427 13 27 2004 2321 1784 54 167 2005 3586 2871 15 39 2006 2137 1737 22 54

Source: Customs Administration, 2007


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Table 4. Quantity and value of imports/exports of virgin and non-virgin olive oil (2003-2006)

Imports Exports Virgin olive oil Non-Virgin olive oil Virgin olive oil Non-Virgin olive oil Quantity

(tons) Value (LBP

millions)

Quantity(tons)

Value (LBP

millions)

Quantity(tons)

Value (LBP

millions)

Quantity (tons)

Value (LBP

millions) 2003 3 26 1 7 485 1700 898 3124 2004 34 106 26 120 427 1783 1199 4873 2005 1492 5120 151 492 441 2356 1525 7038 2006 829 3079 395 1184 477 2931 1345 6684

Source: Customs Administration, 2007 Main importing countries of Lebanese olive oil are: US (468 tons), Canada (255 tons), Kuwait (250 tons), Spain (161 tons), UAE (154 tons), Australia (151 tons). Very small quantities are exported to Brazil. Until 2005, Canada was the largest importer of Lebanese virgin olive oil followed by the United States (table 5). In 2006, large quantities of exported virgin olive oil went to Spain. On the other hand, United States is ranked first in terms of import of Lebanese non-virgin olive-oil followed by Canada and Australia (table 6). Table 5. Main importing countries of virgin olive oil from Lebanon for the years 2003-2006 Country Year 2003 Year 2004 Year 2005 Year 2006 Q

(tons) Value

(millions LBP)

% Q (tons)

Value (millions

LBP)

% Q (tons)

Value (millions

LBP)

% Q (tons)

Value (millions

LBP)

%

Australia 12 45 3 33 122 7 48 278 12 34 183 6 Brazil - - - 12 41 2 - - - 2 8 - Canada 179 635 37 113 464 26 138 726 31 108 647 22 Germany - - - - - - 15 103 4 - - - Qatar 27 105 6 41 179 10 65 339 14 - - - Spain - - - - - - - - - 140 886 30 UAE 45 99 6 26 120 7 7 46 2 4 25 1 UK 3 12 1 20 100 6 1 11 - 2 13 - US 146 535 31 87 362 20 78 457 19 78 418 14 Source: Customs Administration, 2007 Table 6. Main importing countries of non-virgin olive oil from Lebanon for the years 2003-2006 Country Year 2003 Year 2004 Year 2005 Year 2006 Q

(tons) Value

(millions LBP)

% Q (tons)

Value (millions

LBP)

% Q (tons)

Value (millions

LBP)

% Q (tons)

Value (millions

LBP)

%

Australia 109 347 11 52 217 4 185 925 13 117 803 12 Brazil 3 11 - 6 32 1 8 41 1 6 42 1 Canada 62 204 7 107 523 11 160 816 12 147 945 14 Germany 37 121 4 14 52 1 6 34 0. 2 18 - Italy 28 151 5 262 651 13 - - - - - - Kuwait 62 191 6 44 165 3 111 495 7 250 772 12 Oman 32 150 5 9 32 1 - - - 5 37 1 Qatar 12 53 2 16 62 1 27 120 2 45 155 2 Spain 109 301 10 85 262 5 162 683 10 21 60 1 UAE 70 154 5 90 267 5 132 238 3 150 410 6 UK 5 24 1 33 190 4 26 185 3 16 79 1 US 209 840 27 347 1761 36 485 2577 37 390 2482 37 Source: Customs Administration, 2007


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Until 2003, Lebanon was still importing very small quantities of table olives (less than 70 tons per year). However, the year 2004 has witnessed a sharp increase in imported table olives, Syria being the largest exporter (2321 tons in 2004; 3586 tons in 2005; 2137 tons in 2006). The low-cost production along with the full implementation of the GAFTA agreement allows table olives originating from Syria to compete with Lebanese olives. The value per imported ton of table olives (around 500 USD) is three folds lower than the export value per ton of table olives (around 1600 USD). Lebanon imported around 1224 tons of olive oil in 2006 (68% virgin), the majority of which came from Syria (more than 99%). On the other hand, with the full implementation of GAFTA agreement, imports of olive oil have drastically increased since 2005, competing with the Lebanese olive oil. The value per exported ton of olive oil (2700-3500 USD) is 25-40% higher than the import value per ton of olive oil (2200-2500 USD). The import value per ton of olive oil has decreased by more than half with the increase in imports from Syria (starting 2004); the price per exported ton of olive oil has increased from 2300 USD (in 2003) to 3500 USD (in 2006). In general, import/export prices of virgin olive oil are 20% higher than import/export prices of non-virgin olive oil. Table 7. Main exporting countries of virgin olive oil to Lebanon for the years 2003-2006 Country Year 2003 Year 2004 Year 2005 Year 2006 Q

(tons) Value

(millions LBP)

% Q (tons)

Value (millions

LBP)

% Q (tons)

Value (millions

LBP)

% Q (tons)

Value (millions

LBP)

%

France 2 16 63 1 7 7 2 17 - 2 17 1 Italy 0. 4 15 - 2 2 1 14 - 1 8 - Syria 33 97 91 1488 5089 99 827 3053 99 UK 1 6 22 - - - - - - - - - Source: Customs Administration, 2007 Table 8. Main exporting countries of non-virgin olive oil to Lebanon for the years 2003-2006 Country Year 2003 Year 2004 Year 2005 Year 2006 Q

(tons) Value

(millions LBP)

% Q (tons)

Value (millions

LBP)

% Q (tons)

Value (millions

LBP)

% Q (tons)

Value (millions

LBP)

%

France - 1 9 - 2 2 - - - 1 4 - Italy 1 6 85 2 24 20 1 8 2 - 4 - Syria - - - 16 46 39 148 469 95 391 1167 99 Source: Customs Administration, 2007 2. Apple exports and imports (value, volume, main export/import markets…) Lebanon exports more than 40% of the total apple production. In the last five years, the exported quantities of apple have considerably increased from 18000 tons in 2002 to 55000 tons in 2006 with a total value ranging between 6.3 billions LBP and 17.5 billions LBP (table 9). Apple exports constitute around 25% of the total value of exported fruits and 9.2% of total value of exported plant products. Egypt is the largest market for Lebanese apples with more than 80% of the total exported apples (35.5 thousands tons). Other importing countries of Lebanese apple


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include traditional markets for Lebanese fruits and vegetables exports which share did not vary in the last few years: Saudi Arabia (8,000 tons), Kuwait (4,000 tons), United Arab Emirates (2,000 tons), other Gulf countries like Bahrain, Oman and Qatar (2,000 tons). Jordan imports around 2,000 tons; Sudan and Iraq started increasing their imports to reach 500 tons and 300 tons respectively in 2006. Very low quantities are exported to Europe (table 10). Table 9. Quantity and value of imports/exports of apple (1998-2006)

Year Imports Exports Quantity

(tons) Value

(LBP millions) Quantity

(tons) Value

(LBP millions) 1998 47 15 39,354 23,093 1999 0.3 2 34,235 17,109 2000 317 372 35,076 13,246 2001 310 398 29,859 9,523 2002 772 817 18,806 6,284 2003 634 599 27,883 9,217 2004 1338 1016 55,337 16,008 2005 1658 1170 50,357 14,601 2006 1043 821 54,993 17,475

Source: Customs Administration, 2007 Until 2001, Lebanon was still importing very small quantities of apple (around 300 tons per year in 2001) at an average cost of around 400 millions LBP, mostly from United States, Syria, South Africa and Chili (table 11). An increase in the import of apples started in 2002 with Syria being the largest exporter of apple to Lebanon (more than 750 tons in 2006). The low-cost production allows apple originating from Syria to compete with imported as well as Lebanese apples. Most of apple production (90%) is exported between September and March with the highest exported quantities recorded in October-December and February-March; exports might extend until April-May. Table 10. Main importing countries of apple from Lebanon for the years 2003-2006 Country Year 2003 Year 2004 Year 2005 Year 2006 Q

(tons) Value

(millions LBP)

% Q (tons)

Value (millions

LBP)

% Q (tons)

Value (millions

LBP)

% Q (tons)

Value (millions

LBP)

%

Bahrain 284 54 0.6 443 79 0.5 335 67 0.5 385 64 0.4 Egypt 14178 6323 68.6 32041 11465 71.6 33438 11606 79.5 35439 14153 81.0 Iraq 115 35 0.4 231 68 0.4 509 71 0.5 258 39 0.2 Jordan 2195 592 6.4 3896 907 5.7 1618 332 2.3 1820 335 1.9 Kuwait 2805 502 5.4 4355 778 4.9 3372 571 3.9 4288 633 3.6 Oman 634 108 1.2 1464 226 1.4 1473 221 1.5 1152 161 0.9 Qatar 404 106 1.2 650 148 0.9 518 140 1.0 676 212 1.2 Saudi Arabia

5459 1044 11.3 9081 1546 9.7 7083 1141 7.8 8174 1160 6.6

Sudan 116 71 0.8 184 128 0.8 44 24 0.2 512 304 1.7 Syria 350 58 0.6 348 67 0.4 102 27 0.2 361 55 0.3 UAE 1250 262 2.8 2254 428 2.7 1840 372 2.5 1922 346 2.0 Source: Customs Administration, 2007


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As shown in table 9, the exported quantities of apple have decreased in 2001 until 2003 then increased sharply starting 2004 with the implementation of the Export-Plus Program (refer to para ). The increase in exported apple can be explained by the increase in areas allocated to the cultivation of new apple varieties that are more demanded in local and regional markets. The export of Lebanese apple has started to face strong competition in terms of prices and varieties raising the importance of improving production quality, and decreasing costs along with finding new markets for marketing the crop. Traditionally importing countries started to produce their own apple and other neighboring countries have increased areas allocated to apple production, causing a reduction of the market share of Lebanese exports in the Gulf countries. The value per imported ton of apple (520 USD) is more than double than the export value per ton of apple (around 210 USD). Though the export value of apple has varied between 200 and 250 USD per ton in the last seven years, Lebanon is still exporting low value apple either because of the type of product or its low quality. The price per exported ton of apple has sharply decreased from 390 USD (in 1998) to 190 USD (in 2005) with increasing competition with neighboring countries and the full implementation of the GAFTA. Table 11. Main exporting countries of apple to Lebanon for the ers 2003-2006 Country Year 2003 Year 2004 Year 2005 Year 2006 Q

(tons) Value

(millions LBP)

% Q (tons)

Value (millions

LBP)

% Q (tons)

Value (millions

LBP)

% Q (tons)

Value (millions

LBP)

%

Chili 63 72 12.0 126 185 18.2 20 36 3.1 100 143 17.4 China 27 29 4.8 19 25 2.5 10 14 1.2 7 11 1.3 France 18 19 3.2 1 1 0.1 2 3 0.3 25 45 5.5 New Zealand

9 10 1.7 6 10 1.0 3 7 0.6 2 4 0.5

S.Africa 88 83 13.9 25 35 3.4 16 26 2.2 0 0 0 Syria 127 92 15.4 908 614 60.4 1545 1037 88.6 767 518 63.1 US 197 240 40.1 29 55 5.4 16 29 2.5 23 39 4.8 Source: Customs Administration, 2007 IV. IDENTIFICATION AND ANALYSIS OF THE MARKET STRUCTURE In Lebanon, the market of fruits and vegetables is mainly controlled by middlemen and exporters that operate over a network of 7 wholesale markets (Sin el Fil, Bir Hasan, Jbeil, Tripoli, Saida, Qabb Elias and Fourzol). It is at the level of the middlemen, that the added-value of production takes place in the absence of adequate marketing structures (delivery docks, adequate weighting technologies, refrigerators, storage rooms, auction facilities…) resulting in a decrease in production quality and thus profitability of farmers. Marketing activities are left to the commissioners, middlemen and monopolistic wholesale traders, and the resulting low prices are totally absorbed by the growers. The modern sector of the large-scale distribution is expanding. A significant part of the current domestic production does not meet the norms of quality that are required by consumers, leaving the large-scale distribution, in order to meet their demand, working on organizing themselves for importing products from neighboring countries. In some cases, the supermarkets contract potential producers or semi-wholesalers who are able to provide them with a wide range of commodities along all the production season. In this case, supermarkets specify their needs, and regulations as well as payment modalities.


Fruits and vegetable shops constitute a significant share of the retail market. They get their supplies mostly from the wholesale markets and less from the farmers directly. Small supermarkets, mini-markets and corner shops that have diversified end-products are supplied both by semi-wholesalers, wholesalers and rarely by direct contact with farmers. Road retailers have a minimal share of the market. Their activity is informal and thus they cannot be assessed. In some cases, such retailers are small farmers or their family members which sell their small and diversified production at the farm level. Apples. Exporters and wholesalers guarantee most of the marketing of apples. Exporters of apples are specialized in the export of fruits and vegetables. Exporters buy the products directly from the producers and less from the wholesale markets. Exporters either buy the production at the time of harvesting at market prices or buy it from producers before harvesting; in this case, production to be harvested is estimated and the selling price is lower than market price. The first selling mode generates higher prices with no guarantee for selling the whole produce as compared to the second selling mode, where farmers are ready to give up some revenues for lower risks associated for not selling the whole production. In both cases, exporters are responsible for harvesting and post-harvesting activities related to the crop. Contracts between farmers and exporters or dammans are in most cases informal. Exporters buy apples when prices are low and store it and export it to markets when needed. Early production, as well as better quality and new apple varieties get higher prices. Diagram 1. Simplified diagram of marketing routs for fruits and vegetables in Lebanon

Small and medium Farmers

Processing it

Wholesalers Exporters

Foreign agents Distributors

Consumers

Retail market (local or abroad)

Storage/packaging unit

Big farmers

Restaurants, hospitals…

“Damman”

Semi-wholesaler

Source: ENSAM ET INRA.2003. Les fillieres fruits et legumes au Liban : structures, fonctionnement et perspectives 14


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Apples destined for local production are marketed in the wholesale markets. Apples are sold in plastic boxes of 15-20 kg to wholesalers or to shops of fruits and vegetables or to the large scale distribution and supermarkets. Producers take the products to the commissioners present at the wholesale markets that would sell the product with a 10-15% commission without considering eventual weight fluctuation in addition to overestimating dumping volumes. Wholesalers do not store the products. Most of the selling transaction volumes are carried out in the morning; lower prices are recorded in the afternoon where most of Beirut wholesalers buy their products and the unsold or bad quality apples are sold at lower prices at the end of the day for processing. To sum up, different scenarios are possible for the marketing of apples as the case for the other fruits and vegetables (as shown in diagram 1): Producer-damman-wholesaler-merchants- retailer; Producer-wholesaler-retailer; Damman-wholesaler-merchants-retailers (damman would be in this case responsible for harvesting and marketing); Damman – wholesaler-retailer Table olives and olive oil. Table olives are marketed to relatives and friends. In addition, olives are sold directly or through wholesalers to supermarkets, small mini-markets and shops. In most of the cases, olive oil is marketed directly from farmers to consumers (relatives and friends) in 16 kg plastic containers (18-20 liters gallons) with no indication on grade or quality but very much dependant on farmer’s reputation. Olive oil farmers supply some olive processing units that will package, label and market the products (either sell it in supermarkets or export it). Olive oil sold in supermarkets and/or exported are in glasses bottles or containers with a total capacity of 0.5-5 liter. The label indicates product category and manufacturer (not in complete conformity with international standards). With respect to exported olive oil, packaging and labeling requirements follow marketing standards of the importing countries. V. STUDY OF THE MARKETING INFRASTRUCTURE INCLUDING STORAGE, PROCESSING, TRANSPORTATION… The marketing infrastructure for agricultural products face several constraints at different levels that need to be reconciled in order to increase the quality of the produce for local market as well as regional and international markets. Sorting and Packaging Units. Sorting and packaging units are located in major agricultural areas. The number of operational units has decreased in the last two decades with the majority far from fulfilling international requirements and standards for the Gulf and the EU markets. Trial and labeling according to the quality of the produce and traceability are rather uncommon practices. These units concern fruits and vegetables, particularly those that are destined to export. Such units are either independent or linked to storage and cooling units. Storage Facilities and Refrigerators: Refrigerators estimated at around 120 units are located all over the country (agricultural areas, Beirut suburbs…). Few farmers have their own refrigerated facilities. Prices paid by farmers to the refrigerated facilities vary according to the period of storage and its length, as well as the quantity of the stored boxes. Refrigerators charge farmers approximately 1.5 USD per box of apple from harvest until the end of February then 20 cents per month if apples are kept in refrigerators for extended periods. The majority of refrigerated storage facilities lack modern technology (controlled atmosphere). Many traders rent storage rooms from owners where they mix different commodities into the same room, thus affecting shelf-life and quality of the product.


Transport: Fruits and vegetables are primarily packed in boxes at the farm level and then transported either to the market, the storage or processing units via different kinds of vehicles. Refrigerated trucks are seldom used resulting in reduced quality for perishable crops. On the other hand, refrigerated trucks are mainly used for export of fruits and vegetables by land. Olive oil mills. In Lebanon, the total number of mills is estimated at around 490 mills in addition to around 35 complementary industries (soap, coal, packaging…). More than 85% of the registered mills are traditional resulting in low productivity, and 10-15% are automatic or semi-automatic (MOE survey). The distribution of mills according to mohafaza: North (45%), Mount Lebanon (18%), South (17%), Nabatiyeh (15%), Bekaa (5%). Modern mills are more expensive than traditional ones guaranteeing better quality olive oil, producing more capacity per hour, and requiring less labor. Farmers pay mill operators cash between 0.23-0.45 USD per liter of olive oil produced (0.34 USD per liter) regardless of the type of mills employed. The cost of pressing varies between 7-10% of of olive oil produced. Samples of olive oil are sent for testing to laboratories when exported and rarely when marketed in the domestic markets. VI. STUDY OF THE PRICING MECHANISMS Pricing is set by the dynamic forces of the markets. Pricing system is not controlled nor supervised by neither the government nor the farmer. In such situation where the market transaction is not transparent, middlemen increase their profit margins.

Chart 1. Yearly price variations of olives (black) 2002-2006

0

500

1000

1500

2000

2500

3000

2002 2003 2004 2005 2006

Year

Ave

rage

pric

e (L

BP

per k

g)

Wholesale Price GoodQuality

Wholesale Price AverageQuality

Retail Price Good Quality

Retail Price AverageQuality

Source: Agricultural Price Surveys 2002-2006, Ministry of Agriculture Olive and olive oil prices. The prices of olive oil vary according to the years (high vs. low production years) in addition to the type and quality (chart 2). Prices vary between 100,000 – 150,000 LBP per 18-20 liters of olive oil. Prices of olive oil are decreasing since 2000 with the increase of imports from Syria with the GAFTA full implementation.

16


Chart 2. Yearly price variations of olive oil (extra virgin vs. virgin) 2000-2004

010002000300040005000600070008000

2000 2001 2002 2003 2004

Year

Ave

rage

pric

e (L

BP

per

liter

)

Extra virgin olive oil Farmgate price

Extra virgin olive oilWholesale/ retail price

Virgin olive oil Farm gateprice

Virgin olive oil Wholesale/retail price

Source: Ministry of Agriculture Apple prices. Major factors affecting apple prices include quantity and quality of production, variation and period of maturity, and availability of export markets. At the beginning of the season, prices of apple are high when production is still limited. Prices start decreasing with increase in supply since harvesting calendars of apple varieties coincide in the same period; In order to spread production period and get higher prices, storage of apples takes place. Apple prices stabilize for few months in the fall and winter then start to increase starting April until June (less quantities left in refrigerated storage rooms). At the peak of production, surplus on the market causes drop in prices. Some exporters tend to buy the production when prices are low and store it in cold rooms then market it when prices start to increase or export it. Chart 1 shows monthly average wholesale vs. retail prices of apple depending on quality (good vs. average quality). The recorded wholesale and retail prices are not weighted averages and thus they do not reflect real average prices of apple.

Chart 3. Monthly price variations of apples (Golden variety) in 2006

0

500

1000

1500

2000

2500

Janu

ary

Febr

uary

Mar

ch

April

May

June

July

Augu

st

Sept

embe

r

Oct

ober

Nov

embe

r

Dec

embe

r

Month

Aver

age

pric

e (L

BP p

er k

g) Wholesale Price GoodQualityWholesale Price Average QualityRetail Price Good Quality

Retail Price AverageQuality

Source: Agricultural Price Surveys 2006, Ministry of Agriculture 17


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There are variations in prices of different varieties of apples (starken gets the higher price followed by golden then “Mouachah”). Average prices of apples are decreasing since 2002 caused by the increased competition of low-cost imported apples from Syria after the full implementation of the GAFTA. In 2006, an increase in apple prices was recorded (partly due to the decrease in low-cost import and increase in export). Table 12: Yearly average wholesale and retail prices for apple (2002-2006)

Year Whole sale price (LBP/kg)

Retail price (LBP/kg)

Variety Good Quality

Average Quality

Good Quality

Average Quality

2002 Starken 1822 1187 2190 1591 Golden 1517 1082 2009 1456 Mouachah 1016 737 1404 1051





Source: Agricultural Price Surveys 2002-2006, Ministry of Agriculture VII. ANALYSIS OF THE SUPPORT POLICIES AND THE ROLE OF THE GOVERNMENT IN MARKETING AND MARKETS OF THE SELECTED CROPS Support policies of the government for promoting and enhancing marketing and trade of agricultural products can be summarized as follows: (1) Agricultural trade policies, (2) Agricultural exports subsidies; (3) Agricultural programs and projects. In order to develop trade exchange, the government signed a number of trade agreements between Lebanon and major trading partners. In addition, the government established a special program for promoting the export of agricultural products (Export-Plus Program). At the same time, several agricultural projects were carried out in the last few years aiming at improving the quality of agricultural products to comply with international norms and standards. In addition, it is to be noted that in years of over production and thus when problems in marketing of the selected products (apples, olive oil) might arise, additional financial resources were mobilized to counteract the negative effects by either buying the product from the farmers or compensating them for the low selling prices. In 2003, an amount of 5 billions LBP was allocated to apple growers and 10 billions LBP for olive oil producers. Such policies were set temporary and on a one-time basis.


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1. Bi-lateral and multi-lateral agricultural trade agreements

In 1999, government agricultural trade policy has completely shifted, and this was a first step towards the preparation for trade liberalization. The government applied tariff in the agricultural sector; the agricultural calendar is no more applied, the import of all types of agricultural products is allowed, and custom duties became the only type of border protection (in addition to a number of phytosanitary and health measures). Lebanon is a signatory of a number of multi-lateral and bi-lateral trade agreements with some general provisions on facilitating trade of agricultural products. Taysir Agreement (signed in 1981; ratified in 1985). In 1999, Lebanon signed the Implementation Program for the Facilitation of Trade among Arab Countries Agreement for the establishment of a Greater Arab Free Trade Area (GAFTA) within ten years from the beginning of 1998. The Agreement called for gradual tariff reductions (at an annual rate of 10% and 20% for the last 2 tariff cuts), and allowed some exemptions during the transitional period. In addition, an agricultural calendar for 10 groups of agricultural commodities was allowed in the transitional period. The calendar did not allow for any import prohibitions. Agricultural products listed in the agricultural calendar (including apple) have not benefited from the tariff reductions during specific time periods as set by the calendar (maximum number of months allowed did not exceed 7 months per product and 35 months for all products). Outside these time periods, the same products were subject to the lower tariff rates. The agricultural calendar was repealed with the full establishment of the GAFTA since January 2005, and trade in all agricultural commodities was completely liberalized subject to phytosanitary regulations into effect between 17 Arab member countries (Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Palestinian Authority, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, United Arab Emirates, Yemen), However, and in a recent decision of the Socio-Economic Council of the Arab League (October 2006), Lebanon was allowed to apply an agricultural calendar for the year 2007 as a way to help agricultural sector recover following the latest hostilities in July 2006. As far as apples are concerned, its import to Lebanon was not subject to tariff reductions during the period 1/11/2006-31/1/2007. Bi-Lateral Arab Trade Agreements. On the other hand, Lebanon has bilateral free-trade area agreements with Syria, Egypt, Kuwait and United Arab Emirates. These agreements include particular provisions and some exceptions associated with the free trade of specific agricultural products (mainly fruits and vegetables) between Lebanon and these countries. With the full establishment of the GAFTA agreement, the movement of agricultural commodities and processed food between Arab countries now follows provisions set by the GAFTA agreement. Nevertheless, some exceptions still hold under the Lebanese-Egyptian Trade Agreement (signed in 1998; ratified in 1999). The relationship of this agreement with the GAFTA causes some disputes in particular when some import/export prohibitions are not in line with GAFTA. The agreement called for zero duty as of January 1, 1999 with some exceptions. The export of Lebanese apples to Egypt is allowed from August 1 to April 30 at zero customs duty and its export to Egypt is prohibited outside this period. On the other hand, apple, olive and olive oil originating from Egypt are not allowed to enter Lebanon all year round. European Union-Lebanon Association Agreement (signed in 2002; ratified in 2006). The Interim agreement on trade and commercial issues started on March 2003 and the entry into force of the EU-Association Agreement was in April 2006. The agreement grants selected


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Lebanese agricultural and processed food products certain exemptions or reductions in tariff rates and import quotas. For a transitional period of five years, Lebanon can keep tariffs on agricultural and processed food products, following which it will reduce tariffs by 20-30% annually on commodities subject to tariffs exceeding 5%, leading to full liberalization of trade in these commodities in 12 years. One of the effects of the agreement is the planned harmonization of phytosanitary standards in the EU and Lebanon, which requires upgrading existing standards in Lebanon, to comply with European and international standards. Protocol 1 of the Agreement governs agricultural exports to the EU. The exports of around 25 agricultural commodities are affected by the agreement; the import into the community of Lebanese products other than those listed in this protocol shall be allowed free of customs duty. Three commodities do not enjoy any reduction in customs duty (cut flowers, cane or sugarbeet sugar, and wine). 10 commodities do not have tariff quotas (including cucumbers, artichokes, squash, oranges, grapes (other than table grapes), fresh and dried lemons and limes, mandarins, pears and quinces, plums, and grape juice), most of which benefit from a 100% reduction in the ad valorem part of the tariff (except oranges and mandarins, 60%, and lemons and limes, 40%). Tariff quotas and 100% reduction in the ad valorem tax are applicable to several agricultural commodities: olives (1,000 tons for fresh or chilled; 1,000 tons for preserved olives), apples (10,000 tons in addition to 60% reduction in the ad valorem part of the tariff to any exported quantity exceeding the quota), and olive oil (1000 tons, untreated). Table 13 sets out conditions for the EU imports of olive, olive oil and apple originating from Lebanon. Table 13. Arrangements applicable to imports into the EU of Lebanese olive, olive oil and apple Description Reduction of the

MFN customs duty

Tariff quota

Reduction of the customs duty in addition to the tariff quota*

Annual increase

(%) (tons net

weight)

(%) (quantity) (tons net weight)

Olives and olive oil Olives, fresh or chilled, for uses other than the production of oil1

100 1 000 - - 0

Preserved olives, for uses other than the production of oil1

100 1 000 - - 0

Olive oil2 100 1 000 - - - Apples Apples, fresh 100 10 000 60 unlimited - Source: Protocol 1 of the European Union-Lebanon Association Agreement *The reduction only applies to the ad valorem part of the duty 1. subject to conditions of relevant Community provisions (Articles 291-300 of Commission Regulation No. 2454/93 and its amendments). 2. only applies to imports of untreated oil, wholly obtained in Lebanon and transported direct from Lebanon to the EU. EFTA Agreement (signed in 2004). The EFTA-Lebanon Free Trade Agreement covers trade in industrial goods, fish and other marine products, as well as processed agricultural products. The European Free Trade Association-EFTA States (Iceland, Liechtenstein, Norway and Switzerland) will eliminate duties and other restrictions for the products upon entry into force of the Agreement, and Lebanon will gradually abolish its duties during a transition period starting in 2008 and ending in 2015. Trade in basic agricultural products is covered by agreements concluded bilaterally between each EFTA State and Lebanon and form part of the instruments


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creating the free trade area. Agricultural agreements were signed with Switzerland, Norway and Iceland, granting some tariff concessions to agricultural products originating in both countries. Table 14 sets out conditions for exports of olive, olive oil and apple to these countries. Table 14. Concessions to Lebanese olive, olive oil, and apple from EFTA countries (Switzerland, Norway and Iceland) Description EFTA Countries Switzerland Norway Iceland Olives Free specific or ad valorem

duty all year round Free specific or ad valorem duty all

year round Olive oil Free specific or ad valorem

duty all year round Free specific or ad valorem duty all

year round Apples Free preferential duty rate from Dec 1

to May 31 for a tariff quota of 5,000 tons per year

Free specific or ad valorem duty from December 1 to

April 30

Free specific or ad valorem duty all

year round Preferential duty rate MFN minus

(3.00 Fr/100kg gross) within the limits of a tariff quota

- -

Source: Bi-Lateral Agricultural Trade Agreements with Switzerland, Norway, Iceland WTO Agreement. Lebanon became observer at the WTO as of April 1999. The country has initiated preparations for the accession. An accession master plan was formulated. It includes an evaluation of existing policies, legislations and required reforms for conformity with the WTO regulations. The Ministry of Agriculture has started to review and evaluate trade measures that are being applied on agricultural products of plant or animal origin (prohibitions, advance license/permits, quotas…) and modify those that do not comply with the WTO agreements. Conformity with the Agreement on Agriculture (AOA). In order to comply with the AOA, the legal, policy and institutional regime are being revised. At this stage, tarrification was applied and non-tarrif barriers to trade were eliminated. With respect to the domestic support programs, the government continues to subsidize three sensitive commodities. Conformity with the Agreement on Sanitary and Phytosanitary measures (SPS). The prevalent legal framework for protecting plant, animal and human health is regulated by a number of laws and decisions. There are some deficiencies in the current regime associated with SPS measures: (1) conflicting and overlapping legal authorities for applying SPS measures, where many government bodies are involved in the food control system without proper coordination; (2) problems related to compliance with international guidelines, recommendations, and procedures for ensuring plant, animal and human health, (3) problems in the implementation itself of the SPS measures, where food control activities are not being carried out properly. These problems can present a major obstacle to the access of Lebanese food and agricultural products to global markets. With respect to conformity with the sanitary and phytosanitary measures, laws related to food control are being evaluated and reviewed and new laws have been drafted (laws on plant and animal quarantine…). 2. Agricultural export subsidies In August 2001, Lebanon passed a new investment law that established the autonomous Investment Development Authority of Lebanon (IDAL) to promote investment and agricultural


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exports in Lebanon. As far as agricultural exports are concerned, IDAL mandate includes proposing to the cabinet measures to promote exports of agricultural and processed foods and providing technical and financial assistance to new enterprises to participate in exhibits in foreign countries to promote Lebanese exports. As a mitigating effect of the high exchange rate (non-competitive stand of the agricultural products in export markets), IDAL launched a project (under the name of Export Plus) in 2001 aiming at promoting agricultural exports. The objectives of the project are (1) to increase Lebanese agricultural exports, (2) to open up new markets, (3) to improve the quality of the exported products and encourage farmers to produce better quality products to ensure compliance with international standards, (4) and transfer know-how and knowledge to farmers and exporters. The weight-based export subsidy depends on the kind of product and shipping mode (Table 15).The program benefits farmers, cooperatives, and exporters, where subsidies for export under this project can be rather visualize as subsidies to transportation costs. Since the export subsidy is based on weight only, it does not encourage the export of high value added crops. The total budget of the project was estimated at around 33 millions USD per year. Table 15. IDAL: Export-Plus agricultural subsidy scheme (USD/ton) Product Zone A

(Syria, Jordan, Iraq)

Zone B (Egypt, Libya, Saudi Arabia, UAE, Yemen,

Oman, Kuwait, Qatar, Bahrain, Iran)

Zone C (Other

Countries) Fresh Fruits 50 80 133 Fresh Vegetables 33 50 100 Air Transport* Source: IDAL * 266 USD/ton for all kinds of produce (mainly to Europe) The major agricultural exports under this scheme are fresh vegetables mainly potatoes, and fruits (citrus, apples, grapes…). Most of the exports benefiting from the subsidy are shipped to the Gulf States (Saudi Arabia, Kuwait, United Arab Emirates…) when exports to Europe are negligible. It was shown that the program had a positive effect on increasing agricultural exports and exporters succeeded to tap new markets (mainly Far East countries). Exports are inspected and certified by two internationally accredited firms (TUV Hellas, Bureau Veritas). The inspection covers the following: standards, grading, caliber, homogeneity, weight, packing, marking and category of the agricultural product in accordance with the regulations (Ministry of Agriculture decision no. 385/1 dated 24/10/1997 and its amendment no. 2/1 dated 3/1/2000) and that of the importing countries. Quality control is carried out at three levels: (1) at the orchard level, inspection on the quality of the product at harvesting and recommendation for post-harvest techniques; (2) at the packing house level: inspection on the products quality based on visual and physical tests; some chemical tests are conducted if required by the country of destination; (3) at the Lebanese borders and country of destination: verification is carried out at the Lebanese borders before shipping and at the port of entry in the country of destination if any quality problems arise. Quantities of Agricultural exports benefiting from the export subsidy program exceeded 1,700 tons of fruits and vegetables for the period of August 2001- December 2005. The major agricultural exports under this scheme include pome fruits (59,068 tons). Main destinations are Saudi Arabia which imported over 94,000 tons in 2005 followed by Syria (68,638 tons), Kuwait (63,000 tons), United Arab Emirates (46,157 tons), Jordan (39,859 tons), and Egypt (35,168


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tons). Most of the exports benefiting from the subsidy are then shipped to the Gulf States when exports to Europe are negligible (10,932 tons). It was shown that the program had a positive effect on increasing agricultural exports and exporters succeeded to tap new markets (mainly Far East countries). On the other hand, an inquiry service was put in place by IDAL. This service allows foreign companies that want to export Lebanese fresh agricultural products to submit an application online requesting the varieties and quantities needed in addition to period of time. 3. On-going agricultural programs and projects Numerous multi-lateral and bi-lateral donors are contributing to financing and implementing agricultural programs and projects through loans or grants, executed in close coordination with line ministries such as the Ministry of Agriculture (MOA), the Agricultural Research Institute of Lebanon (ARIL) and other affiliated agencies. On the other hand, international and national NGOs continue to make a significant financial and technical contribution to agricultural development in Lebanon. An array of projects and programmes has been undertaken by NGOs targeting small-holders in rural areas, aiming at agricultural development and infrastructure rehabilitation, training activities, and promotion of employment opportunities. One project is working on development of apple production in Lebanon (INDEVCO). A number of other projects are working on developing the olive and olive oil sector in Lebanon (Mouawad Foundation, YMCA, SRI…). The case of the service center of Moawad Foundation. This NGO intervenes at different levels of the value chain for several commodities including olive oil and fruits. The olive oil is either bought directly from the farmers or pressed in presses linked to the foundation. In other terms Mouawad foundation acts as an oil processor as well as an oil wholesaler. In all cases, the oil is tested, stored and bottled by the service center under different brand names. For instance, in Batroun area the NGO empowered a local cooperative in order to produce and market the oil under the brand name “Zaytounena”. In other areas where the NGO is active, the nomination follows the geopgraphical area (i.e in Marjayoun) the oil is sold for the “Wadi el Akhdar” company and the NGO acts as a link between farmers and manufacturers. VIII. PREPARATION OF AN INVENTORY OF QUALITY AND STANDARD CRITERIA EXISTING ON THE SELECTED CROPS With increasing trade liberalization, the assurance of food quality along the whole chain (from production to processing then distribution) has gained importance and standards have become a prerequisite for access to markets. Many quality and standard criteria exist for the selected crops: national (at the country level; LIBNOR standards in Lebanon); international private sector (GFSI compliant schemes; EUREP-GAP, QS, Assured Produce Individual companies: Marks and Spencer…); multinational sector (EU…); international sector (UNECE, Codex Alimentarius Commission, IPPC…). Only standards set at the national and multinational can be mandatory where those from the private sector and international sector are voluntary in principle unless


24

made mandatory by the country. An overview of national/international quality and standard criteria on olive, olive oil and apple is presented in what follows. 1- LIBNOR standards. A number of standards on the selected crops exist in Lebanon; these standards apply for domestic as well as imported production. Lebanese standards are voluntary in principle; nevertheless, the Lebanese government can make some of these standards mandatory for reasons related to public health, public safety or national interest. Table 16 presents an exhaustive list of Lebanese standards that exist on fresh olive, olive oil and apple, in addition to other related general standards on fresh fruits and vegetables and agro-processed products. None of the standards on table olives or olive oil or apples are mandatory. Table 16. List of Lebanese standards issued on olive, olive oil and apple and other related general standards Name/Product No. of standard Mandatory

Yes/No Standards on table olive, olive oil and olive soap Table olives 697 No Virgin olive oil 231 No Refined olive oil 232 No Refined olive pomace oil 233 No Pure olive oil 468 No Olive-pomace oil 594 No Olive oil soap 220 Yes Standards on fresh and processed apple Apples and pears 477 No Apple juice 235 No Cider vinegar 710 No General standards – fruits and vegetables Fruits and vegetables: sampling methods and quality control 39 No General specifications for fresh fruits and vegetables 40 No Pesticide residues in foods- maximum residue limits for pesticides 662 Yes Fruits and vegetables- physical conditions in cold stores – definition and measurement

549 No

Recommended methods of sampling for the determination of pesticide residues for compliance with MRLs

723 No

Organic production- part 1: plants and plant products- livestock and livestock products, food processing and handling and beekeeping Part 4: food processing and handling

724 No

General standards – agro-processed products Non –carbonated sweetened juices and drinks – general conditions 214 No Fruit drinks 425 No Flavored fruit drinks 426 No Jams (preserves) 239 No Food additives for edible oils and fats 13 Yes Storage and transport of edible oils and fats in bulk 603 Yes Edible oils and vegetable fats 595 No Labeling of prepackaged food 206 No Source: LIBNOR


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2- Lebanese import/export regulations. In order to ensure quality of imported/exported agricultural products, a number of trade regulations are imposed by the Ministry of Agriculture following international recommendations and guidelines (FAO, IPPC, Codex Alimentarius, EU). A ministerial decision no. 358/1 dated 1997 issued by the Ministry of Agriculture regulates inspection of exported and imported fresh fruits and vegetables products following specific technical and quality criteria set per product. The decision and its annexes set a number of packing and labeling requirements and ban the use of boxes made from polystyrene for packing the products. Technical specifications of exported apple under the decision include minimum required quality standards: healthy clusters; clean, free of pests, free of external humidity, free of any abnormal smell or taste, ripe, uniform in size. Three grades are mentioned: extra (with 5% by weight tolerances on the quality criteria); 1st and 2nd class (with tolerances of 10% by weight); in addition to packing and labeling requirements. Table 17 summarizes some of the general regulations related to import and export of fruit products. Table 17. Some general regulations for export/import of fruit products administered by MOA Legal Text Description MOA decision No. 101/1 dated 17/3/2007

Inspection of imported fresh, preserved and processed products of plant origin

Law No. 778 dated 24/2/2006

Plant Quarantine and SPS

MOA decision No. 393/1 dated 28/10/2005

Import ban of fresh fruits (including apples) from a number of countries infested with Ceratitis Cosyra


Import ban of fresh fruits (including apples) from a number of countries infested with Bractrocera zonata unless treated at 1.7oC for 15 days or any other treatment.


Import ban of fresh fruits (including apples) from a number of countries infested with Bractrocera zonata (saunders)

MOA decision No. 385/1 dated 24/10/1997 and its amendment No. 2/1 dated 3/1/2000

Inspection of exported and imported fresh fruits and vegetables products following specific technical and quality criteria set per product in addition to packing and labeling requirements


License required for the import of seeds and seedlings of stone fruit trees, apple, citrus and olive trees

Source: Ministry of Agriculture 3- EU/UNECE standards EU Marketing Standards for Fruits and Vegetables. In order to ensure quality of fresh produce in the EU, marketing standards (previously known as quality standards) provide specific legally binding requirements for a number of fresh products. Imports of fresh fruit and vegetables into the EU are checked for compliance with EU-harmonized marketing standards. When EU standards do not exist, UNECE- United Nations Economic Commission for Europe or Codex Standards are referred to. Such standards are mandatory, and designed to encourage trade by ensuring free movement of the produce within and into the EU. These standards apply at all marketing stages, and include some quality requirements such as quality, size, tolerances, labeling, packaging, presentation and marking. In addition to marketing standards, EU harmonized pesticide maximum residue levels (MRLs) lists are established per product/active ingredient combination.


26

Labeling and Presentation of Fresh Fruits and Vegetables. Labeling requirements for fresh fruits and vegetables (annexed to the regulations on marketing standards) specify that the labels on all packages must include the name and address of the packer/dispatcher, the nature of the produce, its origin and commercial specifications. Amendments with regards to presentation and labeling were added in 2004. As far as presentation is concerned, stickers on individual products may not leave visible traces or glue and may not damage the skin after they have been removed. With respect to labeling, transport packages were exempted from the labeling requirements provided that the sales packages are correctly labeled and visible from the outside. In addition, on all packages except pre-packages, the name and address of the packer/dispatcher may be replaced by the officially issued or accepted code mark representing the packer/dispatcher. On pre-packages, the name and address of the packer/dispatcher may be replaced by the mention “packed for:” followed by the name and address of a seller established within the EU, including the code representing the packer/dispatcher. EU Conformity Certificate Requirements for Fruits and Vegetables. Imported fresh fruits and vegetables into the EU are checked for conformity with EU marketing standards for quality and labeling; conformity checks are conducted by approved inspection bodies at the point of entry; and a conformity certificate is issued for all shipments of fresh produce destined for the fresh market. In the case of third countries whose control procedures are officially recognized, such checks may also be performed prior to import into the EU, and thus reducing delivery times and decreasing administrative costs. A risk-based system for inspecting conformity of imported fresh produce with EU marketing standards is established. Table 18 presents a list of EC Regulations establishing marketing standards and UNECE standards that exist on olive, olive oil and apple in addition to other related general standards on presentation and labeling and conformity of imports to marketing standards. Table 18. List of international and multinational standards issued on olive, olive oil and apple and other related general standards Name/Product Legal text/No. of standard Standards on olives and olive oil EU marketing standard for olive oil EC Regulation 1019/2002 dated 13 June 2002

and its amendments: - EC Regulation 1964/2002 dated 4 November 2002 - EC Regulation 1176/2003 dated 1 July 2003 - EC Regulation 1750/2004 dated 8 October 2004 - EC Regulation 1044/2006 dated 7 July 2006

Codex standard for olive oil, virgin and refined and for refined olive-pomace oil

Codex Stan 33/1981 (Rev. 1-1989)

IOOC trade standard applying to olive oils and olive-pomace oils

COI/T.15/NC No. 3/Rev.2 dated 24 November 2006

Codex standard for table olives Codex Stan 66/1981 (Rev. 1-1987) Standards on apples EU marketing standard for apples EC Regulation 85/2004 dated 15 January 2004 and

its amendments: - EC Regulation 1238/2005 dated 28 July 2005

Marketing and commercial quality control of apples

UNECE standard FFV-50 dated 2003

General standards Marketing standards applicable for fresh fruit and vegetable with regards to presentation and labeling

EC Regulation 907/2004 dated 29 April 2004

Conformity to the marketing standards applicable for fresh fruits and vegetables

EC Regulation 1148/2001 amended by EC Regulation 408/2003


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4- Private standards (GFSI, EUREP, APS…) Such standards are gaining importance as they have become the basis for trade relations between many suppliers and producers. Three types of private standards exist: The Global Food Safety Initiative, which is a cooperation of big retailers which accepts private food standards (food safety and not product quality) following guidelines set by GFSI and working towards harmonization of private standards. Another type of private standards includes those set by groups of companies such as EUREP, QS, APS. EUREPGAP is a series of standards of good agricultural practices including integrated crop and pest management (standards related to the process rather than to the products). In order to be able to supply EUREP retailers, growers should be EUREPGAP certified. Certification steps include the completion of a self-assessment form by the applying grower, assessment by EUREP approved inspection body, then granting a certificate to growers allowing them to sell the produce as EUREPGAP. QS is another system that gives producers certificates that their production process meets the demands, mainly followed in Germany. The Assured Produce System is another certification system requiring farmers to produce following crop specific protocols (APS label). A third type of private standards concerns standards set by single companies such as the British Grocery chain Marks and Spencer. IX. IDENTIFICATION OF THE CHALLENGES, OBSTACLES AND OPPORTUNITIES IN THE MARKETING OF THE SELECTED CROPS ACCORDING TO THE FINDINGS OF THE ABOVE STUDIES Lebanon signed trade agreements to expand and liberalize trade with main trading partners and to open up new markets. Following a transitional period (6-8 years), trade in agricultural and agro-processed products will be largely liberalized. The trade agreements could help increase exports of niche crops, processed food products and high value added fresh fruits and vegetables to the EU and Gulf countries, but at the same time, open up the Lebanese market for competing imports of agricultural and processed food products. It will become increasingly difficult for Lebanese agriculture to be competitive in the production of traditional products compared to Egypt, Syria, Jordan and Turkey because of cheaper labor costs and subsidized input prices. The free trade of agricultural commodities from neighboring countries exposes the Lebanese markets to subsidized agricultural products leading to an unfair competition against domestic producers. At the same time, the opening-up of new markets other than traditional Arab markets is very difficult with the absence of quality norms and products not suitable for such markets. Lebanon must meet the challenges by improving efficiency and focusing on high value added crops geared towards the export markets. Lebanese agriculture, which has long been known for the high quality and wide variety of its fresh fruits and vegetables (and a major exporter to neighboring countries), lagged behind the technological developments and horticultural industry changes, and consequently quality of agricultural production has deteriorated and some of the traditional export markets have been lost. Under such conditions, neighboring countries, particularly Syria, Jordan and Turkey along with Egypt have taken over and became significant exporters of fruits and vegetables to traditional Lebanese markets mainly in the Gulf States and Europe.


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On the other hand, the lack of mobilization of factors of production and their high costs, coupled with inadequate production patterns in addition to quality and safety issues, marketing constraints, and inadequate institutional and organizational settings are major causes leading to the low competitiveness of the agricultural products and increasing trade deficit. This new trade environment requires the restructuring of the whole agricultural sector in Lebanon in the long-run and shifting from traditional agricultural and food-processing production to niche and high value added products, since Lebanon’s ability to compete with other exporters in the region has become quite limited. In order to compete in this challenging new trade environment, it has become imperative to work on improving quality and health standards for exported products, and establishing regulatory framework to ensure compliance with these standards and regulations. In addition, there is a need for developing and improving the agricultural sector and particularly the production and marketing infrastructure and strengthen marketing channels: agricultural production practices (GAP, EurepGAP, IPM…), storage, packing, wholesale markets, market information system (regarding demand prices, seasonality, quality specifications), applicable tariffs and quotas in the main export markets, improve systems of traceability and geographical indications...

The marketing of apples and olive oil still face various challenges and obstacles at the local as well as regional level, which derive from the main challenges facing the agriculture sector as a whole. The domestic and international competition by subsidized cheaper imports (Iran and Turkey, in addition to France, Italy and US for apple) that at the same time restrict agricultural imports from Lebanon is increasing. The productivity that is below its potential is translated into high production costs. Lower productivity reflects the aging of varieties currently produced (the need to introduce new varieties for apple and olives), and the unsuitability of other varieties (might increase olive oil extraction rate to more than 30% with new varieties). Another problem is the inadequate agricultural and post-harvest practices that are followed by producers resulting in a bad-quality product and lower productivity as compared to neighboring countries; in addition to the absence of producers’ organizations that can allow economies of scale in production and marketing. The potential for Lebanese agricultural exports to the EU, Eastern Europe, Gulf countries, US or other countries lies mainly in high value-added, out-of-season fresh, organic or GIs apple that Lebanon can produce. Or good quality (extra virgin) olive oil for which market is expanding with the increased awareness of the health and nutritional benefits of the product (US, Australia, Canada, Japan, Brazil). The growing, climatic conditions in Lebanon along are suitable for the production of high quality olive, olive oil and apple. Lebanon can use cheap visiting labor to produce some labor-intensive high value-added crops competitive for the export market. On the other hand, the large Lebanese Diaspora is a big market for the Lebanese olive, olive oil and apple.


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X. PREPARATION OF A PARTICIPATORY STRATEGY FOR EMPOWERMENT OF THE SELECTED COMMUNITIES AND THE RELEVANT GOVERNMENT AND NON-GOVERNMENT AGENCIES IN MARKETING SAFE PRODUCTS Main orientations of a strategy for empowerment of the selected communities and the relevant government and non-government agencies in marketing the products would intervene at four levels: (1) At the farming level, by improving production quality and improving productivity of the crops (apple and olive) and focusing on the production of demanded varieties (apple) and suitable varieties for processing (olive) for the export market; replacing old orchards (olive and apple); promoting the adoption of best agricultural and harvest practices (IPM, GAP, Eurepgap, Organic…); producing healthy produce free of pesticide residues and phytosanitary pests; strengthening of market-based research on plants varieties marketable locally and for export.; reinforcing of the advisory services at MOA; developing of olive oil by-products… (2) At the marketing level, by developing the marketing infrastructure and supporting new marketing channels; fulfillment of adequate post harvest and marketing operations (storage, packaging, labeling…) required by the importing countries; support initiatives of the private sector in the areas of export promotion and technology transfer; developing market information systems (market news service, production norms and trade information service, trade agreements…); raising consumer awareness on health benefits of the product (apple or olive oil)…

(3) At the processing level, by improving the management of olive oil mills and health, sanitary and environmental requirements; modernizing and upgrading mills and working conditions; providing training on good manufacturing practices and assisting olive oil mills in adopting HACCP; increasing awareness of olive farmers and mill owners on the differentiation of quality produced from different extraction processes; improve quality control (chemical and organoleptic tests); improving storage conditions of olive oil … (4) At the institutional and policy level, by developing the quality infrastructure (certification, accreditation, traceability…); promoting the creation of agricultural cooperatives and farmers groups; and facilitate access of cooperatives and farmer groups to financing sources (develop financial incentives) in order to increase investments in new technologies, production and processing techniques; encouraging each region to brand their apple and olive oil (GIs); increasing collaboration and coordination among the different actors of the chain; establishing a network and creating synergies among different on-going interventions targeting the improvement of apple, and olive and olive oil sectors for a greater impact and improved sustainability…


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LIST OF REFERENCES

1. Central Administration of Statistics (2006). Living Conditions of Households- The National Survey of Household Living Conditions. UNDP-Ministry of Social Affairs, Lebanon

2. Customs Administration, Ministry of Finance; available from www.customs.gov.lb

3. INDEVCO Foundation (2003). Rehabilitation of the apple sector in Lebanon. 4. Institut Libanais de Développement Economique et Social (ILDES). Feasibility studies

for different commodities including apple, olive 2001.

5. Investment Development Authority of Lebanon (IDAL); Reports and Statistics on Export Plus (2001-2006); available from www.idal.com.lb

6. Ministry of Agriculture and European Union- Agriculture Policy Preparation Project

(APPP). Elements of Agricultural Policy and Their Master Plan, June 2003, Wholesale markets, p. 29-41

7. Ministry of Agriculture and FAO (2000). Résultats Globaux du Recensement Agricole,

1999. Lebanon.

8. Ministry of Agriculture and FAO. Agricultural Surveys 1998-2005. Lebanon.

9. Ministry of Agriculture and FAO (2004). Greenhouses development project (TCP/LEB/0067-2906). 7 booklets. Lebanon.

10. Ministry of Agriculture and FAO (2006). Analyse de filière, rapport de synthèse.

Lebanon.

11. Ministry of Agriculture and French Embassy (2005). Les filières fruits et légumes frais au Liban : structures, fonctionnement et perspectives.

12. Ministry of Economy and Trade (2003). The economic accounts for 1997. Lebanon.

13. Ministry of Economy and Trade; Trade Agreements; available from

www.economy.gov.lb

14. Ministry of Economy (2003). Survey on non-tariff Measures on Trade, updated in 2006.

15. Presidency of the Council of Ministers (2006). Economic Accounts of Lebanon 2003. Lebanon.

16. UNEP (2005). Lebanon: Integrated Assessment of the Association Agreement with the

EU with a focus on the olive oil sector.

17. Unpublished papers and reports from different aforementioned public administrations, local and international institutions and organizations.

http://www.customs.gov.lb/

http://www.idal.com.lb/

http://www.economy.gov.lb/

Marketing Study for Olive Oil and Apple in Lebanon 2007-GTFS-REM-070-ITA

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Transcript of Marketing Study for Olive Oil and Apple in Lebanon 2007-GTFS-REM-070-ITA