Algeria Agribusiness Report Q2 2009

Algeria, the second largest of Africa's economies, has increasingly struggled with food security in recent years. A dry and arid climate, limited water resources and an inability to procure adequate fertiliser volumes are just some of the factors affecting production. Meanwhile, an increasingly affluent society with burgeoning consumption demand has compounded Algeria's position as a net food importer. BMI's latest Algeria Agribusiness Report considers the potential for Algerian agriculture as diminishing petrodollars accelerate state plans for economic diversification.

As the Algerian government continues in its efforts to boost the domestic food security status, the subject of self-sufficiency is becoming a well worn theme within the Middle East and North Africa (MENA) region; so much so that in February 2009, the Arab Centre for the Studies of Arid Zones and Dry Lands (ACSAD) held its first conference for developing agricultural research and co-operation in the region. At the same time, the privatisation of various state-owned production units is hoped to encourage the rise of private sector investment.

For the last couple of decades the state has provided subsidies and aid to farmers in order to encourage production. Furthermore, food subsidies have been given to those in society less able to afford staple consumption goods, although this dynamic is coming under pressure as the economic rationale of continued subsidies is being questioned. However, constructive investment has been provided by the government in improving irrigation and attaining adequate and relevant seeds that stand a better chance of surviving Algeria's arid terrain. Additionally, local processing is relatively sound with the presence of major MNCs contributing to our positive milk and cheese outlooks through to 2013.

Yet there remains a series of caveats to improving output; not least a lack of access to credit for the small farmers who comprise the bulk of the farming community. They claim that the government prefers to give loans to large scale producers, while a lack of titled holdings makes it nigh on impossible for smaller farms to provide any kind of collateral. Moreover, fertiliser distribution is controlled aggressively by the state with smaller farms again most likely to lose out to their larger counterparts in securing the relevant inputs. Consequently, we have a mixed outlook on Algeria over the course of our forecast. Wheat and barley are predicted to receive double digit production and consumption growth, while corn production will continue to stagnate. Overall, we expect the country to remain a net importer, although with improved productivity in a few staples.