Agribusiness

MENA agribusiness market posed for steady growth

August 27, 2020

The MENA agribusiness market is expected to grow at a compounded annual growth rate (CAGR) of more than 5% between 2020 and 2025, driven by the:

  • Growing population and increasing food consumption
  • Rapid urbanization and rising incomes levels
  • Increasing focus on the use of agricultural resources
  • Improving methods of irrigation and adoption of new technologies
  • Rising appetite towards Agtech opportunities
  • Leveraging advancements in dairy farming technology
  • Import substitution opportunities
  • Government focus on food security
  • Development of retail opportunities
  • Sustainability agendas

Historically, countries in the MENA region used to import significant volumes of agricultural products and livestock. This has changed, as countries are increasing their local production to enhance food security and are moving toward self-sufficiency (especially countries like Saudi Arabia, United Arab Emirates (UAE), and Egypt, which have high food consumption). The Covid-19 pandemic has impacted the economies of the region, disrupted the food supply chains, and raised concerns about food security over and above the water scarcity challenges already facing the region.

Despite being the driest and most water-scarce region globally, the agricultural sector in the MENA region plays a vital role in the economies of most of its countries. The sector's contribution ranges from around 4% in Saudi Arabia to 14% in Egypt, backed by large-scale irrigation facilities that produce high-value crops, including vegetables, fruits, sugar, and cereals. Wheat and barley are the two major staple crops grown in the region, in addition to crops such as maize, rice, chickpeas, and lentils. Moreover, date palm is one of the leading agricultural produce of the region, with around 84 million date palm trees thriving, mainly in Saudi Arabia, Egypt, Iran, Iraq, Morocco, Algeria, UAE, and Tunisia.

In the GCC countries, limited arable land (which ranges between 0.2% in Oman to only 2.1% in Bahrain), water shortage, and harsh weather conditions are making the region less suitable for growing crops and highly dependent on imports. Along with this, a fast-growing population (projected to reach 57 million by 2025) will lead to increased food consumption levels, and a necessity to expand domestic production capacities to manage food security. The GCC nations are actively investing locally in new technologies, and in parallel across borders to secure future food supplies, by acquiring farms and farmlands in many African countries, such as Zambia, Ethiopia, Sudan, and Morocco.

Despite challenges, such as soils with low fertility, hot and dry climate with low precipitation, and high incidence of animal diseases and agricultural pests, MENA countries have been turning large expanses of the desert into agribusiness areas and attracting hefty investments in various areas, such as farming, dairy, poultry, and aquaculture. For instance, Saudi Arabia has attracted investments of more than USD 53 billion annually in the agricultural sector; the country has become completely self-sufficient and has transformed from being reliant on imports to an exporter of products, a result of the Vision 2030 initiatives. In addition, many funds were established like the Abu Dhabi Investment Office (ADIO) in UAE and Agriculture Development Fund (ADF) in Saudi Arabia to fund projects such as vertical farming, high tech greenhouses, aquaponics, aquaculture, information platforms and technologies, robotics & artificial intelligence, research & development projects, among others, which are further expanding the domestic production of local players and attracting new entrants to the market looking for cheap sources of funding and government support to access the market.

Smart harvesting robot using image recognition to pick ripened strawberries grown indoor

Egypt is the most populated country in the MENA region, and agriculture is a key sector in the Egyptian economy. To boost the agribusiness sector in Egypt, agencies like USAID have often come to aid with their investments, enabling farmers to purchase land, improve their farm management techniques, and have access to financial services and liberalized markets for seeds and fertilizers. The country is also the world's principal producer of long-staple cotton (1.125 inches and longer), typically supplying around one-third of the global crop production.

In line with efforts to improve food security, governments in the region have turned to the aquaculture industry, supporting its growth by encouraging investments and providing incentives. They support aquaculture infrastructures, such as hatcheries and feed mills, providing juveniles of local species, and funding research and development programs to improve the productivity of existing species and increase the local production, which also mitigates the high cost of imports.

The aquaculture industry is still immature in most of the MENA countries. Modern aquaculture is emerging in the region, led by Saudi Arabia, UAE, and Oman; the total production volume of MENA is expected to reach 3 million tons by 2030. Moreover, the governments have outlined long-term strategies to increase the annual production. For example, Saudi Arabia is targeting annual production of 600,000 tons by 2030 and has been working closely with farms such as National Aquaculture Group (NAQUA), Jazan Energy and Development Company (Jazadco), Tabuk Fisheries Company, Tharawat Seas, and Aquaculture Sharq Farms to expand production and introduce new species and techniques, and alternatively attract new players to the market. Similarly, aquaculture is a core component of the UAE's National Food Security Strategy, and the government is working closely with companies like Fish Farm LLC to further advance the sector.

Farmed shrimp is one of the fastest-growing aquaculture species. Many of the region’s countries are in the early stage of shrimp farming, such as Turkey, UAE, and Oman, whereas, leading producers such as Saudi Arabia (~70,000 tons), Iran (~50,000 tons), and Egypt (~10,000 tons) are looking to further expand production relying on not only domestic consumption, but expanding export opportunities. Saudi Arabia is also home to the world's most extensive single bio-secure Recirculating Aquaculture System (RAS) facility, and the country is looking to increase its shrimp production to 200,000 tons by 2025.

Separately, the increasing demand for packaged foods, the rising popularity of new product lines, organic fresh meats, and dairy products, and the development of modern and innovative retail spaces present growth opportunities for the dairy and poultry markets in the region. The MENA region is one of the world's largest dairy import markets, with local production currently accounting for a small percentage. Nevertheless, owing to the improving herd and crop management techniques, animal husbandry is expected to drive the productivity of the dairy sector to meet the domestic demand. With a population of 430 million, the MENA region has large-scale dairy operations, with Saudi Arabia leading the market due to the presence of Almarai, which is the biggest dairy producer in the Middle East. However, the cold chain sector in the region is relatively underdeveloped, which is one of the main challenges for the industry.

Milking section of a large-scale dairy factory in Jeddah, Saudi Arabia

In the poultry market, MENA countries are shifting towards more advanced housing and processing systems, and substantial investments are being made toward environmentally controlled poultry houses. As consumption of poultry in the region is growing at a compounded annual growth rate (CAGR) of 5%, and despite the increasing production, there still exists a shortage of supply resulting in significant imports of poultry. Saudi Arabia and Egypt are expected to witness the fastest growth in the region.

Despite the impact of Covid-19 lockdowns, the situation of food production and availability is at a satisfactory level in most countries of the MENA region. Nonetheless, the region is being highly dependent on the import of cereals and thus is vulnerable to global market disruption due to lockdowns. Post Covid-19, the agribusiness industry is expected to resume its smooth functioning food supply chain and continue its strong growth.

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