Al-Monitor Pro Members
Francisco Serrano
Journalist and analyst specialized in North Africa
Feb. 6, 2024
Algeria is set to become the world’s fifth largest buyer of soft wheat in 2024, as imports are projected to increase 11% compared to 2023, reaching 7.2 million tons. The need to resort to more imports is primarily due to water scarcity which has particularly impacted Algeria’s cereal production following a prolonged period of drought. Under its 2020-2024 Agriculture Roadmap, Algeria had set itself the goal of cutting as much as $2.5 billion from total annual food imports of around $10 billion in recent years. These plans, however, are being challenged by volatile rainfall patterns. To reduce the impact of drought on its food production systems, Algeria will need to focus on mechanization and economies of scale to increase annual agricultural yields.
- With an economy built on energy exports, Algeria’s population of 44.9 millionhas depended on annual food imports of around $10 billion in recent years, according to figures by the United States Department of Agriculture. The bulk of these foodstuff imports are centered on a few strategic commodities, namely wheat, corn, oil seeds, vegetable oils and sugar. Under its 2020-2024 Agriculture Roadmap, authorities aim to increase domestic production of strategic food commodities.
- According to figures by the Central Bank of Algeria, agriculture accounted for 11.6% of GDP in 2022. The sector employs about 2.5 million people, but remains heavily dependent on annual rainfall levels, leading to severe output variations. For instance, after falling by 1.9% in 2021 due to drought, agricultural production increased by 5.8% in 2022 on the back of improved rainfalls.
- Over the first half of 2023, several regions suffered from a lack of rain yet again. But according to the World Bank, improved rainfall over the fall strengthened the likelihood that 2024 agricultural output will be relatively better.
- Most of the country’s northern provinces still face a 90% deficit in water availability for agricultural production. Unless adequate precipitation continues through winter, 2024 will likely turn into another difficult year for essential crops.
- Strengthening the cereal sector will be critical. Algeria remains dependent on international markets to supply domestic needs, buying nearly 13 million tons of cereals annually over 2018-2022, according to figures by the Food and Agriculture Organization of the United Nations (FAO). Domestic cereal production is expected to reach 3.5 million tons in 2023, 12% below 2022’s output, and 20% below annual average production over the past five years.
- The Agriculture Roadmap initially aimed at increasing annual cereal production to 7.1 million tons by 2024. To that end, Algeria has been subsidizing seeds, irrigation equipment and fertilizers, as well as extending credit facilities for the sector. However, these policies will take time to be reflected in production capacity and it remains unlikely that Algeria will reach its target by the set date.
- Authorities are also looking to boost investment in the sector by relaxing regulation surrounding project ownership. Until 2020, Algerian regulations limited foreign investors to a maximum 49% minority stakes in investment projects. But under new investment laws enacted in 2023, foreign investors in agriculture and other sectors are now able to hold a majority stake in investment projects. However, these changes are yet to yield the anticipated results.
- One notable move undertaken by Algerian authorities in recent years has been to develop the more arid lands to the south of the country. In September 2020, it established the Office for the Development of Agriculture in Saharan Lands (ODAS) with the aim of attracting agricultural investment into the southern provinces. As of 2023, the ODAS had made a total 450,000 hectares available for investment projects in the region. But these will require investment in electricity connections, transport routes and irrigation equipment.
- With as many as 70% of Algerian farms characterized as small-scale or family-owned, structural weaknesses and insufficient modernization will continue to challenge the sector.
- Water availability is expected to improve with infrastructure expansion. Five new dams are expected to come online in 2024, and take storage capacity from 8.3 billion cubic meters to 9 billion cubic meters. However, these will require time before they really impact the sector.
Scenario 1: Domestic production surges in 2024 on the back of abundant rainfall, helping to curb food imports
Exceptional rainfall over 2024 drives up agricultural output. This helps domestic production of cereals and other strategic crops. For 2024, Algeria is able to cut $2.5 billion in food imports in accordance with its goals. Agro-industrial producers are able to access key inputs domestically, bringing down operational costs. Although food imports remain significant, domestic availability reduces prices of key goods, helping to lower overall inflation.
Abundant rainfall over the coming winter is a probable scenario that would boost food production. But, rather than being structural, the gains would be limited in time and negligible in scope. Cyclical improvements in annual rainfall have already proved unable to effectively impact Algeria’s agricultural sector and transform it into a reliable supplier of food goods for its population.
Scenario 2: Food imports continue to expand significantly on the back of ongoing drought and slow policy implementation
A continuation of drought over 2024-2026 would further weaken domestic food production and make the sector less attractive for private investment. This would drive food import requirements, increasing vulnerability to global commodity markets, and fueling domestic inflation. Unfavorable climatic conditions combined with opaque regulations act as deterrents to boost investment in the agricultural sector. Furthermore, if a decrease in energy prices reduces the government’s fiscal abilities, allocating adequate funds to modernize the agriculture sector will be challenging.
Given that broader import-cutting measures have a been a key policy instrument of President Abdelmadjid Tebboune, it is unlikely that global food imports will increase significantly, even under conditions of water stress. However, specific food categories will likely see import rises ahead of Ramadan in early 2024.
Algeria’s food production capacity improves gradually although progress is blunted by inconsistent rainfalls. As such, the government’s goal of shaving $2.5 billion worth of food imports is achieved, but not before the end of this decade. Providing authorities commit to developing power and irrigation infrastructure, investments into the southern regions should continue to trickle in, especially as existing projects mature.
Government measures drive production increases but at different speeds. Large-scale producers and food processors incorporate state incentives rapidly into their production chains. However, traditional and smallholder farms will face difficulties to effectively expand output and take advantage of government incentives. They will continue to require financial support in times of drought.
The rising allocation of financial resources to agro-industrial production enables for the emergence of new fast-moving consumer producers in the food space. These will focus on the domestic market initially and, once local demand met, gradually move into exports of certain foodstuffs. New water infrastructure will help mitigate water shortages, but this will only influence agricultural output significantly towards the end of the decade.
Francisco Serrano is a writer and analyst who focuses mainly on North Africa. He has been published in several outlets, including Foreign Policy, World Politics Review and the Middle East Institute. His second book, "As Ruínas da Década," about the past decade in the Middle East, was published in March 2022.