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Grain and Flour Market in Yemen

12 September 201311 min reading
Being a net importer country in terms of agricultural products and foodstuff, Yemen imports 25 % of the foodstuff it needs. Especially wheat is among the major imported products in the country. Country’s dependency on foreign trade for foodstuff and being not developed enough industrially is considered as a huge potential for foreign investors and exporters. Consisting of two countries as South and North separated in the beginning of 1900s, Yemen was renamed as Yemen Republic officially in 22 May 1990 that is a very recent date. Located among the Middle Eastern countries and on the south edge of Arabian Peninsula near to Africa, Yemen is surrounded by Saudi Arabia from the north, Oman from the east, Indian Ocean (Gulf of Aden) from the south and Red Sea from the west. According to World Bank data; Yemen’s population that was 24,8 million in 2011, increases averagely 3,2 % annually. The country population is considered to double in 2020. This shows that the import demand of Yemen that is a country dependent on foreign trade for food products would increase further in the following years. Today, wheat is among the basic import items. Representing nearly 95 % of the country need, wheat import is realized by a few large companies in the country. Also engaged in flour milling, these importers process almost all of the imported wheat. YEMEN ECONOMY Petroleum and agriculture are the major mainstays of Yemen economy. 9.7 % of the national income in 2009 was obtained from agriculture and 51.1 % was obtained from petroleum. If the dependency of the country’s economy to petroleum is taken into consideration, it can be said that the economic situation changes according to the fluctuations in the petroleum prices. Yemen’s petroleum reserves are limited compared to the standards of Gulf countries. Proven petroleum reserves of Yemen was measured as 3 billion barrels as of 2009 and is considered to run out in 15 years. Expectations for gas reserves are a little higher. Proven natural gas reserves was measured as 478.5 billion m3 as of 2009. As one of the cornerstones of the economy traditionally, agriculture constitutes 20 % of gross domestic product. According to the data of World Bank; half of the active population of Yemen works in the agricultural sector. Increasing water need in the cities poses a threat for the agriculture sector. Compared to neighboring Gulf countries, Yemen has a little economy with its limited petroleum reserves and relatively excessive population. Its economic resources depend on declining petroleum reserves. It is planned to develop the sectors other than petroleum and increase foreign investments. As a result of the program, $ 5 billion has been committed to the development projects. The recent positive results obtained from the reformations encourage foreign investments. One of the most important problems of the country is unemployment. Unemployment rate is around 35 %. Aiming to have averagely 5.6 % growth rate per year within “5-Year Development Program” including the years between 2001 and 2005, Yemen economy did not achieve this target and had 2 % growth rate especially in 2004. According to the predictions of EIU; growing 3.5 % in 2007, 3.2 % in 2008 and 3.8 in 2009 Yemen economy is predicted to grow 5.2 % in 2010 and 3.0 % in 2011. AGRICULTURE IN YEMEN Although the petroleum sector constitutes an important part of the government and export income, agriculture is the mainstay of Yemen economy. According to the last official data; agriculture sector employs 31 % of the work force and constitutes the income of three-quarters of the population directly or indirectly. It constitutes more than 20 % of gross domestic product. According to the World Bank data; erosion and decline of the forested land are the elements threatening agriculture. 3 % of the country lands are proper for cultivation and the rate of the lands on which perennial can be cultivated is only 0.25 %. Farmers cannot afford important agriculture inputs like fertilizer and the cultivated lands in the country are narrowing. The use of irrigation facilities increases agricultural production. According to FAO statistics; fruit production increased five times and vegetable production increased six times in the country in 1960s. Besides, the import bans for the fruits and vegetables applied by the government encourages producers to make production on this fields. Grain and cereal production is not preferred by the farmers due to the pricing policies of the government and cheap import possibilities. Grains, fruits, vegetables, pulses, khat, coffee and cotton are cultivated as agricultural products in the country. Another important problem of the country in agricultural production is irrigation as Yemen is among the top ten poorest countries of the world in terms of water resources. The size of the land on which irrigation can be done in the country does not exceed 6 thousand km2. There are 4.1 billion km renewable water resource reserves in total. The usage of water in Yemen is realized 6.6 km3 yearly. 4 % of this usage is for general purpose use and 1 % is for industry sector and 95 % is for agriculture sector. In the western regions where 90 % of the country population lives, the need for water is gradually increasing. GRAIN PRODUCTION AND CONSUMPTION Production of grains like wheat, rice and corn is extremely low in Yemen. According to the data of U.S. Department of Agriculture Foreign Agricultural Service (USDA); wheat production of the country varies between 100 and 200 thousand tons. Accordingly; wheat production that was 132 thousand tons in 2001/02 season reached its highest level in 2009/10 season with 265 thousand tons. In the following years, production declined to 220 thousand tons. USDA estimates that Yemen wheat production has been realized as 220 thousand tons in 2012/13 season. In Food and Agriculture Organization of the United Nations (FAO) data; it is stated that the average wheat production was 228 thousand tons between 2008 and 2012. Declaring country’s 2012 wheat production as 250 thousand tons, FAO estimates 275 thousand-ton production in 2013. In Yemen that realizes 40-90 thousand tons corn each year the most widely grown grain is sorghum. USDA data show that the sorghum production of the country in 2001/02 season was 289 thousand tons. It is estimated that sorghum production reached 601 thousand tons in 2006/07 season but in the following years it declined again and was around 350 thousand tons. FAO data show that the average sorghum production between 2008 and 2012 was 414 thousand tons. Expressing 2012 sorghum production of the country as 460 thousand tons, FAO makes the same estimation for 2013. Considering FAO data, the total grain production in the country between 2008 and 2012 was average 825 thousand tons and 909 thousand-ton grain production was realized in 2012. The estimation of FAO for 2013 is 935 thousand tons. If the grain products are evaluated in terms of consumption, it is seen that the largest consumption rate is experienced by wheat. According to USDA data; Yemen’s wheat consumption, which was 1,9 million tons in 2001/02 season, reached to 3,3 million tons in 2012/13 season by increasing constantly in the following years. The rice consumption in the same periods reached to 450 thousand tons from 250 thousand tons. MILLING AND GRAIN PROCESSING SECTOR Manufacturing sector in Yemen constitutes 9.9 % of gross domestic product. Lack of funding and the dependence of many inputs on import are the most important factors that prevent the growth and development of the sectors based on manufacturing. 95 % of the industrial organizations in Yemen are small-scale and employ 1-4 workers. Middle-scale companies (5-9 workers) constitute 4 % of the total. Large-scale ones (10 or more workers) only constitute 1 % of total. Food stuff and beverages constitute 49 % of the industrial organizations in the country. Flour production has started to increase in the recent years and flour mills are among the major industrial organizations today. Markets in Yemen are mainly characterized with a non-competitor attitude. In the market where the majority makes wheat and rice import and a few big companies are dominant, a great part of the wheat needed for local consumption is imported. Large importers that also make storing and milling have an important potential on wheat and wheat flour storing and milling. 90-95 % of the imported wheat is milled into flour by generally the same trade companies Aden and Al-Hodeida in their sea port facilities. Including the small companies, daily milling capacity of the importer mills in the country is declared as 7-8 thousand tons. As the largest importer miller in the country, Aden has a 250 thousand-ton combined storing capacity. Al-Hodeida has a similar storing capacity. THE GENERAL FOREIGN TRADE The most important item of the foreign trade in Yemen is petroleum. The main export item of the country is petroleum but as mentioned above, the petroleum reserves have started to decline and these sources are considered to run out in the near future. Export except petroleum is based on agricultural products and these are basic foodstuff and animal skin. Major industrial organizations are plastic, cement, aluminum, textile, paint, resistant milk, cigarette factories and flour mills. The most important import item in the country is foodstuff. As a net importer of agricultural products and foodstuff, Yemen imports 25 % of the foodstuff it needs. Thus, especially the food sector is considered as a huge potential in terms of foreign investors and exporters. Due to the difference between import and export, the trading accounts of the country changes depending on the fluctuations of the world prices. When the foreign trade indicators of the country are taken into consideration, it is seen that foreign trade balance works in favor of imports. Yemen realized 8,977 million-dollar export in 2008, whereas it realized 9,334 million-dollar import in the same year. It is estimated that the foreign trade deficit in the country reached 1,706 million dollars in 2009 and 1,383 million dollars in 2011. According to the data of Sana Commercial Counselor Embassy of Turkey; Yemen’s major export items in 2008 were crude oil (81.46%), fuel oil (4.84%), kerosene (31.4%), naphthalene (2.17%) and frozen fish (0.69%). On the other hand major export items in the same period were petroleum-derived fuels and oils (20.40%), machinery, equipment and parts (10.88%), wheat (7.89%), construction, iron and steel pipe (4.80%), rice (1.54%), milk powder and cream in solid form (% 1:51), frozen chicken (1.48%), sugar (1.34%) and portland cement (1.01%). According to 2009 data; major countries that Yemen made export mostly were China (36.2%), Thailand (17.6%), India (13.6%), South Africa (6.1%) and Japan (5.5%) and the countries that Yemen made import mostly were China (14.3%), UAE (12.3%), India (8.9%), Saudi Arabia (5.8%) and USA (4.6%). Top products that Turkey exports to Yemen are all types of construction iron and steel products, prepared foods and biscuits, machinery and electrical products, motor vehicles and parts, sunflower oil, chocolate products, and baker’s yeast. THE PLACE OF GRAINS IN FOREIGN TRADE As mentioned above, Yemen imports an important part of its food need. Wheat, rice and corn have an important role on this import. FAO defines the dependency of the country on wheat import as 95 %. According to the data of FAO; Yemen has been importing 2,7 million tons of total 2,86 million-ton average wheat consumption in the last five years. The organization estimates that the imported wheat amount to be needed by the country in January-December 2013 period would reach to 3,75 million tons by increasing 7 % compared to 2012 year. USDA data about wheat import of Yemen are almost at the same level with FAO data. According to USDA data; realizing 1,7 million tons wheat in 2001/02 season, Yemen reached its highest import amount in 2009/10 with 2,9 million tons. Realized on the same level in 2011/12 season, country’s wheat import is estimated to be as 3,1 million tons in 2012/13 season. Rice and corn are also major grain products that imported by Yemen. In USDA and FAO data, it is stated that country’s rice and corn import is around 400 thousand tons. The import amounts of the two products are almost the same. According to USDA data; importing 250 thousand tons rice and 252 thousand tons corn in 2001/02 season, Yemen increased its import amounts of both products over 400 thousand tons. Importing 425 thousand tons rice and 450 thousand tons corn in 2011/12 season, it is estimated that the country imported 450 thousand tons rice and corn in 2012/13 season. Grain products import of the country in total is around 3,5 million tons. According to FAO data; the average total grain amount that the country imported between 2008/09 and 2012/13 season was 3 million 475 thousand tons. Whereas the total grain import was 3,5 million tons in 2012/13 season, this amount is predicted to reach 3 million 750 thousand tons in 2013/14 season. In the country, while small traders tend to import wheat from India and China, large traders prefer to make import mainly from Australia, USA, Ukraine, France and Syria.
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