The economic perspective of converting avocado farming in Lebanon from conventional to organic

Table of Contents

1. Introduction

2. Theoretical Background and Literature Review
2.1. Current Economic Crisis in Lebanon
2.2. Avocado Farming
2.2.1. Lebanon
2.3. Current Avocado Market in Lebanon: Chain Actors
2.3.1. International Avocado Market
2.3.2. Europe as a Potential market for Lebanon
2.4. Organic Farming
2.4.1. Definitions
2.4.2. Benefits and Opportunities of Organic Farming
2.4.3. Challenges
2.4.4. Converting to Organic Farming Debate
2.4.5. Organic Certification in Lebanon
2.4.6. Organic Market in Lebanon
2.5. Global organic market
2.6. The Lebanese Value Chain of Fruits and its Potential for Europe
2.7. Research Questions

3. Materials and Methods
3.1. Qualitative Research Methods
3.1.1. Quantitative versus Qualitative
3.1.2. Data Collection Method: Interviews and Case Studies
3.2. Analysis: SWOT
3.3. Procedure
3.3.1. Respondents’ Backgrounds
3.3.2. Price per kg

4. Results
4.1. Export
4.1.1. Exporting to Europe in 2021
4.1.2. Transition Period and Certification
4.2. Cost Analysis: Non-Organic Chemicals Used and Labor

5. Discussion
5.1. Costs of Converting to Organic Farming
5.2. Comparison with Avocado Farming in Mexico
5.3. Additional Aspects of Organic Avocado Farming
5.4. Social, Ethical, and Environmental Aspects
5.5. Alternatives
5.6. Limitations

6. Conclusion

7. Bibliography

8. Appendix: Interview Questions

Acknowledgements

I would like to express my gratitude to my advisors Prof. Dr. Oliver Frör and Dr. Stefan Jergentz for their constant support throughout this thesis. I would also like to thank Mr. Paul Averbeck for giving me ideas and always being there to discuss and supervise my work.

My gratitude is also dedicated to my scholarship advisors Mrs. Christina Baade and Mrs. Petra Wachter at the Konrad Adenauer Stiftung along with Miss Daniela Diegelmann for providing me with professional and financial support throughout my Master’s study. Without you, this experience would have not happened.

Finally, I would also like to thank my friends and family, especially my father who has worked hard to always develop his business. His passion for avocados inspired me to perform this study. To my mother and sister, thank you for giving me constant motivation despite the current situation in Lebanon.

List of Abbreviations

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1. Introduction

Lebanon is one of the small countries in the Middle East where agriculture plays a huge role in supporting its economy (Skaf et al., 2019). The United Nations stated that, in total, 6.8 million people reside in Lebanon (Chalak & Sabra, 2007) where the agriculture sector contributes to 2.5% of the Gross Domestic Product (GDP) and offers jobs to more than 11% of the population (O’Neill, 2021). Due to a Mediterranean climate and a fair amount of rain, the Lebanese agricultural practice varies along the mountains and coast. With the suitable climate, fertile soil, a high amount of rainfall, and water availability for irrigation, more than 2000 different wild species of plants can grow. This allows for different types of crops as well, including field crops, olives, fruits, vegetables, and many more (Chalak & Sabra, 2007). This diversity enables not only the benefit to the locals but also the exporting of the harvest to the Arab countries and Europe.

In the past, farmers were dependent on certain fruits, mainly citrus (lemon, orange, mandarin, etc.). These were planted on a 210-km-area along the coast (Mikhael & Saadeh, 2016). However, these fruits have suffered during the past decade as a result of socio-political-economic reasons, failing to provide economic support for the local farmers. Nevertheless, farmers showed a potential to shift agricultural practices towards other fruits. The avocado tree showed to be a prominent candidate and its role in agriculture has had a huge development with the help of projects by foreign nations such as the United States (US), The Netherlands, and France. This supported the agriculture sector through the funding of projects and by providing experts to help farmers increase their production to a higher level.

Today, avocado farming belongs not only to the important fields of Lebanese agriculture but also in the Arab and European markets the sale of Lebanese avocados has been prominent. The international market for avocados is highly competitive, and research shows that markets such as Europe prefer better quality and more sustainable organic fruits (CBI, 2021). However, the economy in Lebanon has seen a drastic decline since October 2019 and farmers need a sustainable plan to keep their work going. From October 2019, until today, the inflation of the Lebanese Pound (LBP) has been getting worse every day. Farmers have not seen any type of support from the government and continue to depend on international funding and projects. Current research predicts that if no plan to help this sector is implemented, agriculture could be seen as a hobby in the future rather than an economic asset or even a career (Sabaghi, 2021). Having said that, since the avocado sector in Lebanon is seeing a huge development and is getting more and more popular for export, farmers have been looking for ways to promote and develop this sector. Some are planning on converting their business and becoming organically certified farmers. However, there are still doubts and worries along the way.

While other studies have examined the potential benefits of farmers to convert to organic in other countries or for other crops, because of the unique economic crisis that Lebanon is experiencing, this study presents a special case for this conversion. Therefore, the goal of this paper is to find out whether converting from conventional to organic farming of some avocado farmers would improve the economic situation of the farmers in Lebanon. It also aims to look deeper into the motivation of conversion, obstacles in the way, and to consider alternatives.

The second chapter consists of several sub-chapters that will explain why this study is important, starting with an explanation of the current economic crisis in Lebanon, then defining the environmental requirements and economic situation of avocado farming in Lebanon. Relevant literature and previous studies that tackled the topic will be reviewed as well. The third part will describe the method that was used to answer the research questions. As a case study, interviews with local farmers in Lebanon were conducted online to understand the local perspective. Hence, the fourth chapter will present the results of the interviews proceeded by a discussion in the following section. Finally, the sixth chapter will end with a conclusion and further recommendations.

2. Theoretical Background and Literature Review

2.1. Current Economic Crisis in Lebanon

To provide context regarding the hardships farmers in Lebanon are facing, it is essential to introduce the current economic situation in Lebanon that is harshly affecting all sectors, especially agriculture. Lebanon is currently facing one of the hardest economic crises ever seen. According to White (2020), “Dollarization means the transition from using a domestic fiat currency to using an external currency, typically the US dollar, as the monetary standard.” (p.2). Barbuscia (2021) stated that Lebanon is indeed practicing dollarization as seen in dollar payments, withdrawals, and deposits. The main currencies used in Lebanon are the LBP and the United States Dollar (USD). Therefore, the inflation rate of LBP increases as a result of the spread of dollarization in Lebanon (White, 2020). The exchange rate had been stable at one USD equivalent to 1,507.5 LBP since 1997. However, this changed drastically in the Summer of 2019. Due to the financial sufferings of the Lebanese Government such as the increasing chance that it will default on maturing debt obligations, the black market exchange rate moved away from the official exchange rate.

This rate kept increasing until it reached one USD equivalent to 24,000 LBP in July 2021. This happened as a result of the devaluation of the LBP triggered by a severe lack of USD within Lebanon. This shortage led to more than 780 restaurants and coffee shops closing down their business between September 2019 and February 2020 and led to the unemployment of more than 60% by 2020. Prices for consumer goods have amplified by more than 56% since October 2020 resulting from the worst economic crisis in decades. This economic crisis resulted in the drop of the GDP in Lebanon to about 33 billion USD from about 55 billion USD in the previous year. Also, the minimum wage of a working person in Lebanon declined from 400 USD to 60 USD per month (Barbuscia, 2021).

The economic crisis has had a lot of different effects on the Lebanese people including security and lack of resources. People only have access to electricity for one hour per day and to generators for three hours per day. A Turkish ship was providing electricity of 380 watts for one billion USD to Lebanon. This ship stopped providing electricity this year because the Lebanese government could not afford to pay in USD anymore (Saoud, 2021). In addition, medicine is also lacking nowadays because pharmacies cannot buy their medicine from foreign markets in USD anymore (Dahan & Kanaan, 2021).

In terms of the agriculture sector, this economic situation has caused a great deal of stress for farmers in Lebanon including avocado farmers. One stressor for the farmers is the land rental increase. In the region of Mount Lebanon, one ha was rented for 4,000 USD before the inflation in areas where water is available. In the north region, where water is not as available, one ha would cost two to four million LBP (equivalent to 2,660 USD at that time). Greenhouses were rented for around 3,600 USD per ha. The highest rent was found in the coastal areas because of high demand and competition between lands available for construction and retail versus lands for farming and agricultural practices. One ha could be as high as one million USD if it was sold, and up to 4,000-5,000 USD per ha if it was rented.

Another stressor for farmers is that the prices of materials are sold to them in USD, but they sell their produce in LBP. For example, the farmers import machines and chemicals from foreign countries using USD. Before the inflation, this was not an issue. However, nowadays, it does not compensate for the farmers. For instance, if the farmers’ income was 400 USD which previously converted to 600,000 LBP, it would now still be 600,000 LBP but would be equivalent to a lower amount in USD. Therefore, the farmers cannot afford those machines anymore. Moreover, this also applies to the avocado fruit which is locally sold in USD. That means that the local customers, who also earn their salaries in LBP, cannot afford this fruit as much as they could before, and thereby, causing the local demand to drop. Hence, farmers are seeking the foreign market for export to increase their income if they can sell their produce there for higher prices, especially in a foreign currency. Therefore, the next chapter will evaluate the local avocado market in Lebanon and the potential to enter the foreign markets and deduce where the highest potential lies.

2.2. Avocado Farming

2.2.1. Lebanon

As mentioned in the introduction, citrus was the most economically beneficial fruit planted and sold in Lebanon and was in high demand for export in Arabic countries as well. This changed due to the Syrian conflict when the borders with Syria, which previously served as an export road to the Gulf, closed and the demand for citrus fruit became so low that farmers were losing income. Also, there has been no financial support for the citrus fruit plantation, whereas, for avocados, high funding is provided constantly by international organizations (Rahhal, 2018). For example, the Lebanon Industry Value Chain Development (LIVCD), which is a project funded by the United States Agency for International Development (USAID), had the theory that the avocado was a good possibility to replace the citrus. That is why they started the official plan to develop this sector starting in 2012 and continuing until 2019. The goal was to progress the competitiveness and worth of Lebanese products and services in both the local and foreign markets. Rahhal (2018) also states that the USAID dedicated three million USD to the growth and development of the avocado sector.

Avocado became the number one alternative and it became more popular among international organizations who decided to put a lot of funding into the sector. Table 1 shows the comparison of revenue when comparing avocados with citrus and banana after the costs of production, therefore, showing the potential of avocado for a better income.

Table 1: The revenue comparison between avocado, banana, and citrus. (Abou Arrage, 2018)

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The following sub-chapters will describe in more detail the climatic, environmental, and economic background of how avocado farming has developed in Lebanon as well as what the current market situation is for avocado production in Lebanon.

2.2.1.1. Environmental Requirements

In order to better understand the considerations needed for developing avocado production in Lebanon in the future, this section introduces the environmental requirements of avocado in terms of soil, climate, and water needs and management. The avocado tree is an evergreen tree with a height of 10-15 m that is originally from Mexico (Duarte et al., 2017). Its shape varies according to the type and reproduction methods. The fruit is green in color at the early stages and then develops a dark, shiny hue in the ripening stage. The trees planted with seeds (not grafted) grow straight and perpendicular due to the firm control of the upper part. The avocado root system, like any other plant, is highly dependent on soil, climate, and agricultural performance. Deep, sandy, moderately homogeneous, well-drained soils help extend the roots deeper. The soil moisture, in turn, is strongly affected by the climate (Hijazi, 2016). The roots are superficial in areas where the soil surface is wet during the year, especially if the water drainage is weak. The land appropriate for planting avocados should be clear of any disease, should have a good water leakage, be 1.5 m deep, and display a pH between five and seven. The trees should be planted three meters apart from each other (Hijazi, 2016). As for the climate, Hijazi (2016) stated that it determines the appropriate time to start planting avocado trees. The climate also allows the mass of roots to be removed and transplanted at any time of the year if the irrigation system is effective and monitored. In the Mediterranean climate, the intensity of the winter is the main factor affecting the timing of planting, especially in areas exposed to the risk of frost. If the expected temperature is very low, it is preferable to postpone the planting until the spring. Moreover, avocados require abundant light and are preferably planted in sunlight-flooded areas with around 2000 hours annually. The avocado in Lebanon receives 3500 hours of sun per year. However, extensive sun-rays could burn the leaves, bulks, branches, and trunk. Therefore, shading is recommended for several months after planting to protect the young plants from the sun and the cold or dry winds. The trunk is protected with plastic wraps or collars and supported by cushions (Ecofarms, 2015).

Hamade (2018) claims that knowledge about the interaction between the plant and the soil is necessary to understand the requirements of nutrients and irrigation and their relationship to the growth and productivity of the avocado tree. The amount of water is a major factor affecting tree growth, productivity, and the size of the fruit. Hence, appropriate irrigation is required during the flower development period, so regulating the irrigation intervals during the flowering period can be crucial to the forming of the fruit due to the increased need for fighting water loss from flowers. The second critical stage in irrigation is the stage of rapid fruit growth. The effective irrigation system during this time reduces the rate of fruit fall and increases the final fruit size. In Lebanon, growing one kg of avocado requires 1000 L of water. In the Mediterranean climate, a short spring watering cycle may cause aeration, and the soil is cooler with root damage and a noticeable decline in production (Hijazi, 2016).

Water management has been seen as one of the highest worries when thinking of becoming an avocado grower. According to the Water Footprint Network, planting avocados has been associated with water scarcity in several regions. In Chile, for instance, farming has affected water accessibility for human consumption. Ruben Sommaruga, a professor in limnology interviewed by the Deutsche Welle says: “It’s always a matter of how much and what kind of water you have in the countries where you grow the trees.” (p.4). (Sina, 2021)

As a part of water management, it is important to talk about irrigation systems in Lebanon. Riachi (2016) states that the irrigation plan is complicated in Lebanon. Wells are abandoned and misused by farmers. Policies and updated laws are missing and corruption has spread among the Lebanese farmers so that no one knows who owns or uses which well. 60-80% of the yearly freshwater sources are used for irrigation and there is no official data from the government about how much comes from groundwater. However, statistics and studies show that half of the irrigation water comes from natural springs and rivers whereas the other half is supplied from groundwater.

In Lebanon, avocado is irrigated using either sprinklers or through drip irrigation system when the farmer can afford it. With occasional extreme weather events, Lebanon receives 80% of its rainfall between November and February (Riachi, 2016). Therefore, some farmers also build a rain capturing pool when possible and use this water in farming (Hijazi, 2016). Figure 1 shows the mean monthly precipitation graph for the coastal areas throughout the year. Beirut receives rainfall from October to May making it helpful to provide water for irrigation of the avocado plants.

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Figure 1: Mean monthly precipitation at Beirut (average annual rainfall: 830 mm). (Bakalowicz et al., 2008)

Because of Lebanon’s suitable soil fertility and climate, several types of avocados can be grown and harvested. According to Hijazi (2016), the original types are Mexican, Guatemalan, and West Indian. The Mexican type is characterized by the ability to resist frost, and that it can tolerate high temperatures and low humidity. Even though it is susceptible to soil salinity, this kind of avocado can withstand the fungal disease Phytophthora cinnamomi that causes root rot. The leaves flower early and the period between flowering and harvesting the fruits vary from seven to nine months. As for the Guatemalan avocado type, it can tolerate cold weather and frost. Also, its fruit is larger in size than the Mexican one, and the variation in time between the flowering and harvesting can be eight to ten months, or sometimes fourteen months in extremely cold regions. The amount of fruits that this tree carries fluctuates from one variety to another. Finally, the West Indian type is the least resistant to frost and cold weather, yet the highest in tolerating salinity. The period between flowering and harvesting the fruits differs between five and seven months. This type originated from Colombia and is known for its light green leaves. However, the commercial types of avocado that are highest in demand in Lebanon are Hass, Lamb Hass, and Ettinger, Pinkerton, Reed, Fuerte (shown in Figure 2). This is because of their year-round harvest and special taste and producing these types provide access to more markets (Hijazi, 2016).

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Figure 2: Avocado varieties in Lebanon. (PSDP, 2019)

2.2.1.2. Economic Background of Avocado Farmers in Lebanon

After covering the environmental aspects of avocado farming in Lebanon, it is important to mention the economic situation of the fruit to evaluate its potential in the international market later on. This sub-chapter aims to present the main economic actors in the avocado sector. A report by Abou Arrage (2018) listed in detail the chain actors as well as the international funding projects that were present. The chain supporters of the avocado sector in Lebanon vary. The seedlings are provided in high amounts in nurseries in the south of Lebanon. In addition to that, the rootstocks are not only bought from Europe, mainly Spain, but also from the US, and then grafted with Lebanese scions. These rootstocks can be either virus-free-certified or not. Moreover, the financing of the avocado sector is unstable. Most of the avocado farmers in Lebanon finance themselves. If not, they work on credit gained from input providers or wholesale traders. In other cases, some landowners rent their farms to farmers and they offer to pay for the establishment of the avocado farm.

On the other hand, if avocado farmers come from high-class families, they hire experts for advice and go on international conferences and study tours in Europe or California to expand their knowledge and develop their fields. However, medium and small-scale farmers have no access to advice from experts and are self-experimenting in their fields.

During the last decade, the demand for avocados has increased significantly in Lebanon and the Middle East and North Africa (MENA) region (Abou Arrage, 2018). This value chain, however, is very competitive, and farmers across Lebanon are showing a major interest in it. As a result of this interest, several projects have been started as collaborations with local farmers and have been funded by international organizations such as the USAID, Renee Mouawad Foundation (RMF), and Expertise France.

The USAID established the project LIVCD that ran from 2012 until 2018 and dedicated 3 million USD to the growth and development of avocados in Lebanon. On account of this project, 594 farmers were trained by experts and consultants, and 436 farmers were enabled to create new orchards. Moreover, 13 new nurseries opened and one was renovated. This project benefitted the avocado farmers indeed. The value chain created a huge network and connections among avocado farmers all over Lebanon and increased their income. Furthermore, they were able to expand their businesses. USAID reported that the salary of the input suppliers and providers increased by at least 2.5 million USD during the intervention period. When the LIVCD assessment of the avocado sector first began in Lebanon, the LIVCD project group team of agriculture expertise thought it was scattered and unorganized among a small group of farmers. Only 3700 farmers grew avocados of which half of them grew the fruit as a hobby or a small experiment next to their citrus trees. Also, the land percentage dedicated to avocados was very low and at a beginner stage in 2012 with 660 ha (Rahhal, 2018). There were neither experts nor references about harvesting and planting avocados in the country as well, and this was because the farmers had little to no knowledge about the new technologies that the plant needs. Consequently, Rahhal (2018) also mentioned that the avocado growers were experimenting on their own by trial and error and losing a lot of money in the process because their plants were inedible, and the market value of such fruits was still small.

In addition, avocados in Lebanon started being used traditionally for fruit cocktails as a standard juice and as an essential ingredient in typical Lebanese restaurant menus. Also, sushi has been in higher demand for the past five years, especially the rolls containing avocado. This has shown more popularity and demand than orange juice, which is only in high demand around summer (Mikhael & Saadeh, 2016). LIVCD also promoted creative ideas for avocado by making promotion days to show how avocado can be incorporated into traditional meals such as hummus as well as other sweets. This also led to increasing awareness about avocados among women from rural areas, extolling the health benefits of the crop.

Previously, the LIVCD agriculture projects in Lebanon, such as the value chains for grapes or apples, would usually start with developing the market demand, but for avocado, there was less supply than the demand, so at first, the goal was to increase the yield. Afterwards, this project focused on training existing farmers and giving them access to improving their skills so they could make the most of their existing land. The LIVCD project showed them the ways to strengthen their farming techniques so that more trees could be planted in their lands (Rahhal, 2018). One of the most important skills taught was a drip irrigation system and providing the farmers with the tools free of charge. With these tools, farmers shaped a procedure plan that enabled ten months of production annually by growing different types of avocados at different times. LIVCD consultants also went to rural areas on the coast that had no avocado plants. They wanted to encourage farmers there to start this new strategy. LIVCD provided them with a free irrigation system if these growers were willing to offer the land and crops in return. As a result of this project, more than 960 avocado farmers were trained to plant avocados using conservation agriculture. The land area dedicated to avocados increased from 660 ha at the beginning of the project in 2011 up to 720 ha at the end of 2016. Production doubled because of the project, increasing from less than 500 kg per 0.1 ha to one ton per 0.1 ha. The production quantity per year in Lebanon increased from less than 5000 tons before the project up to 8000 tons today (Figure 3).

However, despite the increased production, the avocado prices have not decreased. This is because new supply channels have been opened. This project enabled the export of containers of avocados from Lebanon to Europe in 2017. The main reason was that the time of production is opposite to that in Latin American countries such as Peru and Mexico, making it a good market for countries where avocados cannot be grown, for example, Germany. Exporting to the Gulf countries also began in 2016 and has allowed new export channels to Jordan (Rahhal, 2018). After the LIVCD project fund ended, RMF cooperated with the Lebanese Avocado Company and Expertise France to develop this sector in north Lebanon from 2018 until 2020 with a budget of 444,440 USD (PSDP, 2019).

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Figure 3: Yearly avocado quantity in Lebanon in tons. (Statista, 2020)

The RMF project was implemented in northern Lebanon because of the microclimate that is present there. This project enhanced the livelihood of vulnerable communities, including male and female farmers, and raised awareness among stakeholders on the importance of upgrading the avocado value chain to improve production (Renee Mouawad Foundation, 2020). This project built up the farming plan where no avocado farms had existed before. Once the project was finished, 139 farmers in the North of Lebanon had incorporated professional avocado production into their business.

On the other hand, despite all the popularity in Lebanon, avocado development faces some issues. When comparing the prices of avocado plants with other trees, avocado trees are much more expensive. One avocado tree costs around 16 USD, whereas a citrus tree costs three USD. This makes it hard for non-wealthy farmers to invest in large land areas since planting one ha would cost around 8000 USD, whereas one ha of citrus would cost 2000 USD (Rahhal, 2018). Hence, before 2012, only rich farmers within the upper class were involved because it was costlier and new, and therefore, was still viewed as an investment. This can be found as well among famous avocado regions like Mexico and California. The upper-class farmers are also educated and well aware of new ways of farming, and they own lands along the coast (Rahhal, 2018). These high prices mean that avocados might not be a feasible investment for small-scale farmers, which could affect the development of this sector. However, the crop could be an opportunity to help younger entrepreneurs to work in agriculture since it is knowledge-intensive and can open investment opportunities and high returns to youth who had no previous interest in agriculture.

Another challenge in this sector lies in the available land areas for further growth. Since the industrial sector is also popular, real estate is in high demand in the coastal zones, where avocado production has a chance to grow. In 2018, a US-based management consulting firm, McKinsey & Company, was hired by the Lebanese government to help support the economy of the country. This company gave some solutions that included and confirmed that the development and support of the avocado sector would make a substantial change (Hamade, 2018). So far, the development of avocado production has been shown to make sense for the climate of the region and could help support the economy, and the next sub-chapter explores the development of the avocado market in Lebanon, the potential global market, and how these markets are related to the economic situation in Lebanon.

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