A fresh approach: Focusing on developing niche products and reducing water usage

Like much of the Gulf region, Abu Dhabi is largely made up of desert, and as such, agriculture accounts for only a small proportion of the economic output of the emirate – less than 1% of GDP in 2011, according to the Statistics Centre-Abu Dhabi (SCAD). Nevertheless, agriculture has a longer local history than one might initially expect – archaeological evidence suggests the oasis of Al Ain in the south-east of the emirate has been cultivated since the third millennium BCE – and the Abu Dhabi government is once again paying attention to the sector.

VOLATILE MARKETS: The end of the past decade saw a spike in commodity prices, which resulted in a period of high food price inflation globally. The Gulf states import the vast majority of their food, and as such are sensitive to international food price fluctuations to a greater degree than many other countries. One response to this price upsurge, which a number of Gulf countries have taken, has been to purchase or lease agricultural land abroad in countries that are more suitable to cultivation.

There is recognition on the part of the authorities that it is unreasonable to aim for complete self-sufficiency in food production. The government plans to develop a strategic agricultural base and to work together with local private companies that have agriculture investments abroad in order to lessen exposure to volatility on world markets. A further, though secondary, consideration is the importance of agriculture in transmitting heritage in a country that has experienced very rapid social and economic change over the space of a generation.

Traditionally, agriculture in the region distinguished between a mazra’a, a farm that involves cultivation of the land, and an izba, which is solely for livestock. Precise numbers of izba farms were not available at the time of writing, but currently, the emirate of Abu Dhabi has around 24,000 mazra’a farms, most of which are very small – around 2 ha on average, according to the Abu Dhabi Farmers Service Centre (FSC). Of these, some 12,000 were in Al Ain Municipality, around 4000 in the Abu Dhabi Municipality and the rest in Al Gharbia Municipality. Many of these are run on a hobby or semi-commercial basis, with the owners often doing some of the work themselves, although in the UAE, as elsewhere in the region, immigrant labour plays an important part in keeping farms going. In the UAE, land ownership is restricted to nationals or GCC citizens, with the majority of farms owner-occupied. There are currently relatively few large-scale integrated agribusinesses, such as are found in neighbouring Saudi Arabia, although their number has been increasing over recent years. Indeed, part of the Abu Dhabi government’s long-term strategy for the sector is to develop more commercially oriented agriculture in the emirate.

ENSURING HIGH STANDARDS: Customs and phyto-sanitary regulations are drawn up at the federal level in the UAE, and the federal Ministry of Environment and Water is responsible for the supply of water to farms across the country. However, agriculture is largely dealt with at the emirate level. In Abu Dhabi, the main regulatory authority is the Abu Dhabi Food Control Authority (ADFCA). Previously, agriculture was the responsibility of the municipalities, but the government transferred agriculture affairs to ADFCA in 2007. ADFCA is responsible for food safety “from farm to fork” – including such areas as inspecting food health standards, testing agricultural chemicals and coordinating agricultural policy within the emirate. The FSC, founded in 2009 under the auspices of ADFCA, operates an educational and extension scheme to local farmers, with 39 extension centres scattered across the emirate and one model farm.

SUPPORTING FARMERS: The UAE does not impose protective tariffs on food imports, which account for around 90% of the country’s food consumption, according to FSC estimates, but in Abu Dhabi the government does provide support to farmers in various ways. In addition to the technical expertise available through the FSC, ADFCA offers up to Dh90,000 ($24,507) of financial assistance to farmers, subject to certain restrictions on what crops can be grown. Additionally, the government guarantees to buy dates using a price structure more favourable to smaller farmers. On the consumer side, the federal Ministry of Economy imposes price controls on certain basic products, such as rice and sugar, while Abu Dhabi supplies consumers with flour from Agthia mills at subsidised rates.

Agthia, a company listed on the Abu Dhabi bourse, is 51% owned by Abu Dhabi’s General Holding Corporation (SENAAT). Agthia maintains a number of food processing and agribusiness divisions. The latter, which account for around two-thirds of its business, include various animal feeds and hay pellets for use as fodder. The consumer division produces foodstuffs such as flour, juice, tomato paste, bottled water and yoghurt, often in collaboration with multinational firms.

These include the international yoghurt franchise Yoplait, as well as Germany’s Capri-Sun and the US’s Chiquita juice brands. In addition to these activities, the firm produces tomato paste and frozen vegetables in Egypt, and in December 2011 acquired a spring water company in Turkey to produce bottled water. Agthia has also partnered with the government to sell certain basic products at a discounted rate to nationals living in small towns in Abu Dhabi emirate who cannot reach a hypermarket easily.

OUTPUT: Although precise figures on harvest yields and their value are hard to come by, according to figures from SCAD, a total of 3.1m tonnes of local agricultural products were supplied to agricultural marketing centres in 2011, with a total value of Dh6.49bn ($1.77bn). This compares with respective figures of 1.05m tonnes and Dh1.72bn ($469.2m) in 2010 and 1.25m tonnes and Dh2.06bn ($560.1m) in 2009. Of these, the leading sector was hay/fodder, which dominated both in terms of volume and of value, with SCAD recording delivery 3.06m tonnes worth Dh6.4bn ($1.74bn) in 2011. The next most important crops were various vegetables, such as tomatoes, worth Dh46.3m ($12.6m) in 2011, onions, worth Dh7.4m ($2.02m), and beans, worth Dh1.8m ($489,346). During the same year, cabbage delivered was worth Dh1.6m ($435,313).

In terms of livestock, in 2011 Abu Dhabi counted a total of 2,398,000 animals, including 2,080,000 head of sheep, 40,000 cattle and 277,500 camels. These numbers are up from a total of 2,357,000 livestock animals in 2010, of which 2,042,000 were sheep, 39,800 cattle and 275,400 camels.

By value, the agricultural sector contributed Dh4.84bn ($1.32bn) to the emirate's GDP in 2011, compared to Dh4.8bn ($1.31bn) in 2010 and Dh4.7bn ($1.28bn) in 2009, according to SCAD.

WATER CONSUMPTION: According to estimates from the FSC, agriculture currently accounts for about 68% of total water consumption in the emirate, consuming 1.74bn cu metres a year, or 56% of all groundwater extracted. Agricultural water consumption is dominated by two perennial crops: dates and Rhodes grass (a type of fodder). The latter consumes 600m cu metres a year, or 60% of all agricultural water consumption in the emirate. By contrast, the emirate’s livestock population consumes around 20m cu metres a year. ADFCA has set targets of reducing the agricultural sector’s water consumption by 40% by 2013 and of reaching 40% market share in fruits and vegetables for local produce. In order to meet this target, the agency is pushing to shift to less water-thirsty crops and crop varieties and more efficient irrigation systems. At the same time, to expand local market share, the agency is putting a renewed focus on quality and marketing.

HORTICULTURE: There is no grain or cereal production in the UAE on any large scale, but also one of the areas receiving the most attention is fruit and vegetable production. Not only does such produce have a relatively high added value, making it viable for local farmers to grow, but also in many cases their water requirements are rather modest, which is a consideration if Abu Dhabi is to achieve its target cut in water usage. Moreover, the public generally buys fruit and vegetables based on freshness as much as on price, and here local farmers have a marked advantage over imported produce, which may have spent weeks in storage and transit. Currently, around 35 varieties of local vegetables and herbs are available, many marketed through the FSC. While the UAE suffers from fairly poor, sandy soils, one vegetable that responds well to the conditions is cabbage, while local tomatoes, cucumbers and peppers, often grown in climate-controlled greenhouses, have proved popular in the domestic market. With the exception of dates, fruit generally has to be grown under glass.

Potatoes are another crop that is growing in importance relatively quickly. Although potatoes do not keep as long as cereals – especially when travelling over long distances – it takes half the amount of water to produce the same calorific energy from potatoes as from grain, making them an eminently suitable carbohydrate crop to produce in a desert country. Abu Dhabi consumed 110,000 tonnes of potatoes in 2011, according to the FSC, but Saudi Arabia, which had been the UAE’s major supplier, banned exports of open-field vegetable crops (including potatoes) in September 2012, adding to the urgency of developing domestic production capacity. In 2010 the FSC imported seed potatoes from the Netherlands and in 2011 from France, and successfully produced a domestic crop of seed potatoes in the 2011/12 harvest, laying the foundation for an independent local potato industry.

DATES & FODDER: However, the pre-eminent crop in Abu Dhabi remains the date, at least in terms of government support and cultural resonance. In global terms, the UAE is the fourth-largest producer, but the largest single exporter, with around 90% of production going abroad, according to a 2009 report by the federal Ministry of Foreign Trade. In 2005 the government founded Al Foah Dates Company, a subsidiary of SENAAT, replacing several smaller entities. Al Foah buys the emirate’s entire date crop and in this way distributes the government subsidy for date-growers. As recently as 2005, half of the dates went to animal fodder (one of the traditional uses for the crop in the UAE), but the advent of modern farming techniques and materials has freed up much of this to be directed to more profitable uses. Al Foah is attempting to shift from dates being a basic crop to products with higher added value (see analysis).

In 2011 just over 3m tonne of fodder, worth Dh3.06bn ($832.9m), was delivered to the agricultural marketing centres, according to SCAD figures. However, the majority of the emirate’s fodder is imported, though some is refined in Abu Dhabi, such as the hay pellets produced by Agthia. In previous years, the fodder crop has been dominated by Rhodes grass, which tolerates salinity, but which is extremely water-thirsty. ADFCA is now moving to end its production, and public subsidies are currently not available to farmers who grow Rhodes grass on their land.

LIVESTOCK: The number of livestock has decreased in recent years, from 2.7m head in 2009 to 2.4m head in 2011. Beef has never featured prominently in the local diet, as national cuisine favours mutton and chicken, and cattle have traditionally been more important for milk than for meat. There is a trend in the industry both towards greater local production of livestock (particularly eggs and poultry) and, simultaneously, a move towards larger, more industrial-type farming. The Al Gharbia region is already self-sufficient in sheep for the major Muslim festival of Eid Al Adha. As late as 2010, 70% of eggs and 50% of meat were imported. According to SCAD, in 2011 the emirate was home to eight broiler poultry farms producing 17,350 tonnes of chicken meat, and four egg poultry farms producing 151m eggs. This compares with nine broiler farms producing 12,000 tonnes and four poultry farms producing 130m eggs in 2008. Figures for local milk production were not available. One niche product is camel’s milk, which Al Ain Dairy produces under the Camelait brand. Camel’s milk is more nutritious and has a higher vitamin content than cow’s milk, and the product has therefore found a market by appealing to the health-conscious, as well as those with a taste for the traditional. “There is potential to develop more value-added food processing locally in areas such as baked goods,” Ilias Assimakopoulos, CEO of Agthia told OBG. “Additionally, UAE-based companies have significant potential to export processed foods to serve the markets in the region.”

FOOD PROCESSING: Abu Dhabi is also home to a number of other food processing groups, including National Food Processing Company and Al Ain Dairy. The food processing industry in the emirate remains relatively small, although there have been notable successes such as Al Ain mineral water, part of the Agthia group. Presently, the main sector competition comes from Saudi Arabia, which is home to several market-dominating agro-food groups, and which, as the largest single market in the GCC, can benefit from economies of scale not available to smaller countries.

Another challenge is that the UAE’s population is one of the most demographically diverse in the world, and the different nationalities in the country each have their own tastes. The UAE has both a large high-value segment (mostly geared to nationals and well-paid Western expatriates) and a value-oriented one (of lower-paid expatriates from Asia), and successfully catering to the tastes and price range of both is a challenge. However, the new industrial zone Kizad, being developed in tandem with the new Khalifa Port complex and due to open by 2013, is expected to provide the industry with a fillip, since it will make importing raw material easier and cheaper.

NICHES: One area where there is a lot of yet untapped potential is organic food. With a focus on fresh and local produce, organic agriculture has proven a successful method for farmers to obtain a better price for their output. While organic farming remains in its infancy the UAE, particularly in regards to certification and so on, there is a large potential market of wealthy consumers who might be interested in organic fruits and vegetables.

Fishing is not a major contributor to Abu Dhabi’s economy, with the total value of the catch in local ports amounting to just Dh69.4m ($18.9m), some 3922 tonnes in 2011, according to the Environment Agency – Abu Dhabi, compared to 6333 tonnes worth Dh124.4m ($33.9m) in 2010. The largest catches were of scombridae (a family that includes tuna and bonito fish) and hamour, a local white fish used extensively in Emirati cuisine. One niche in the local fishing industry is the Royal Caviar Company, a subsidiary of Abu Dhabi’s Bin Salem Holding Company in partnership with German firm United Food Technologies. By the end of 2012, it plans to produce the first commercial quantities of Emirati caviar from a dedicated fish farm in Abu Dhabi. By 2015 the company hopes to produce up to 35 tonnes per year of Ossetra and 700 tonnes per year of sturgeon meat. Total investment in the project is Dh420m ($114.4m).

CHALLENGES: Given the desert environment, one of the most important challenges for Abu Dhabi’s farmers is water. Although residential and industrial users are supplied with desalinated water, it is rare for this to be supplied to agricultural users, who account for two-thirds of the total water demand in the UAE. While this is nothing new in itself – Emirati farmers have been reliant on aquifers for centuries – there is a danger that groundwater resources may be damaged irreparably if extraction continues to outpace replenishment rates, as has been the case for some years. In 2011 SCAD figures showed that groundwater continued to account for the bulk of agricultural water usage, 2.22bn cu metres out of a total water consumption of 2.38bn cu metres. Desalinated water contributed 30.7m cu metres and treated wastewater 126.3m cu metres. On the plus side, total water consumption in the sector has been falling steadily, from 2.81bn cu metres in 2007 to 2.56bn cu metres in 2009 and 2.41bn cu metres in 2010. To help farmers meet its water reduction target, the FSC has been experimenting with crop varieties that consume less water, and there is ample room to expand treated sewage water for irrigation in the emirate’s gardens and some farms. Water savings will continue to increase, especially as the emirate expands its programme to outsource agriculture production abroad.

Hydroponics is another potential way of making precious water go further. This technology involves growing crops in a liquid solution of nutrients in a greenhouse, which is then recycled, cutting water requirements considerably, as well as reducing the need for pesticides. Already, one company, Emirates Hydroponics Farms, produces lettuces, fresh herbs and tomatoes for the local market. However, the equipment required is relatively expensive and requires technical expertise, meaning that a large-scale switch to hydroponic horticulture is unlikely over the short to medium term. There will continue to be a trade-off between food and water security, with governments across the Gulf recognising the need not to compromise the latter. Saudi Arabia has already curbed certain food exports as a means to preserve water resources, while the UAE banned the export of groundwater in bulk in September 2011 and a total ban is expected to follow.

A further challenge facing the sector is a certain resistance to change on the part of farmers when it comes to adopting new varieties and agricultural techniques. This problem is common in many countries, and in the UAE, as elsewhere, when farmers see good results they are generally happy to change.

The agricultural sector continues to suffer from a lack of detailed analytical data, but the establishment of the FSC has gone a significant way in addressing this obstacle. Additionally, the local food processing industry claims that margins can suffer from federal price controls, but that officials are generally sympathetic to their problems and concerns, albeit sometimes slow in effecting changes.

OUTLOOK: The agricultural sector in Abu Dhabi continues to be dominated by relatively small farmers and this is predicted to continue over the short to medium term. Nevertheless, a more commercial approach is evident, with local agribusinesses looking to scale up production and increasing interest among smaller farmers toward niche products. In particular, vegetables, livestock and food processing look set to see strong growth as sourcing supplies from abroad becomes more difficult. Concerns over water are likely to remain but the industry has already succeeded in reducing its water consumption significantly, giving ground for hopes that more reductions do not have to bring on sacrifices in value or quality.