Hardships in Lebanon Shift Focus to Exports

A devaluing local currency coupled with the scarcity of hard currencies has made production more expensive. Producers are turning to exports as a solution.
Photo: Youssef Fares
Feb. 24, 2021
Daniel Dawson

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Lebanese olive oil pro­duc­tion is expected to reach 26,000 tons in the 2020/21 crop year, accord­ing to the lat­est data from the International Olive Council.

While this fig­ure is not too much higher than the rolling five-year aver­age (23,500 tons), a shift is begin­ning to take place in the sec­tor.

To sur­vive the finan­cial cri­sis, and given that a large part of the cost is in U.S. dol­lars, every sec­tor is look­ing at means to export its prod­ucts. This also applies to olive oil.- Youssef Fares, gen­eral man­ager of House of Zejd

Since August 2019, Lebanon has found itself in the midst of a severe finan­cial cri­sis, com­pounded by polit­i­cal insta­bil­ity, American sanc­tions on neigh­bor­ing Syria and the COVID-19 pan­demic.

Rampant deval­u­a­tion of the Lebanese pound, which has lost 80 per­cent of its value com­pared with the dol­lar, and a severe short­age of dol­lars have increased pro­duc­ers’ costs.

See Also: Mystery Behind High Lebanese Olive Oil Prices Solved

Any treat­ment has become unbear­able and with­out the sup­port of the gov­ern­ment, we worry for the 2021 har­vest,” Ibrahim Al Kaakour, the owner of Genco Olive Oil, told Olive Oil Times. We think the lack of sup­port will entail an inabil­ity to pur­chase the needed mate­r­ial and thus make us lose five years of work and treat­ment.”

Importing pack­ag­ing from abroad to sell prod­ucts locally has been a dis­as­ter as for­eign cur­rency has become scarce and main­tain­ing high-end pack­ag­ing is no longer a fea­si­ble and afford­able priv­i­lege for any brand,” he added.

According to a report from the Food and Agriculture Organization of the United Nations, Al Kaakour is not alone. The FAO said that many farm­ers in Lebanon require liq­uid­ity and rec­om­mended that the gov­ern­ment allow farm­ers to import goods at an adjusted exchange rate.

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Youssef Fares

A sim­i­lar offer­ing is avail­able to the man­u­fac­tur­ing sec­tor and has also been used with lim­ited suc­cess to import med­ical equip­ment dur­ing the pan­demic. However, a grid­locked gov­ern­ment and bloated bureau­cracy have lim­ited this strat­e­gy’s effec­tive­ness in the med­ical sec­tor. If it were made avail­able to farm­ers, it is hard to tell how effec­tive it would be.

Due to the lack of gov­ern­ment sup­port, export­ing olive oil is becom­ing more of a neces­sity as it brings much-needed harder cur­ren­cies into the county, which can be used to pay off pro­duc­ers’ expenses.

To sur­vive the finan­cial cri­sis, and given that a large part of the cost is in U.S. dol­lars, every sec­tor is look­ing at means to export its prod­ucts,” Youssef Fares, the gen­eral man­ager of House of Zejd, told Olive Oil Times. This also applies to olive oil with the lim­i­ta­tion that the price of olive oil in Lebanon is higher than in other pro­duc­ing mar­kets.”

In our case, and ever since 2007, we have been largely focus­ing on export­ing our brand Zejd, where we are wit­ness­ing more trac­tion since the local cur­rency deval­u­a­tion made our prices more com­pet­i­tive,” he added.

Al Kaakour, who founded Genco Olive Oil four years ago with the pri­mary goal of export­ing olive oils, has also noticed that the cur­rency cri­sis has made Lebanese oils more com­pet­i­tive on the inter­na­tional mar­ket.

The eco­nomic sit­u­a­tion sim­ply enforced our [export] strat­egy and gave other pro­duc­ers and us in Lebanon a bet­ter edge due to the deval­u­a­tion of the national cur­rency as prices are more com­pet­i­tive now com­pared to other coun­tries.”

However, the Lebanese liq­uid­ity cri­sis goes far beyond a short­age of harder cur­ren­cies to import goods. Part of the prob­lem comes from the country’s bank­ing cri­sis.

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Youssef Fares

Last year, thou­sands of Lebanese depos­i­tors woke up to the painful real­ity that their sav­ings were gone, frozen by an indebted cen­tral bank that was seek­ing to fund the country’s bal­loon­ing deficit.

The finan­cial cri­sis has affected the com­pany and me. I do not have access to my sav­ings in the bank, so prac­ti­cally, the cash flow is not avail­able,” Rose Bechara, the owner of Darmmess, told Olive Oil Times.

I had to bor­row the money to do the har­vest and cover all expenses of fixed assets, oper­a­tional costs, costs of good and every­thing,” she added. Hopefully, we can make a profit and return the money.”

Bechara is in her sec­ond year of olive oil pro­duc­tion in the south­east­ern town of Deir Mimas, which is known as the Bordeaux of olive oil. She said that Darmmess had already sold nearly three-quar­ters of its pro­duc­tion, of which 85 per­cent was exported.

Despite the finan­cial cri­sis, she said that extra vir­gin olive oil pro­duc­ers ben­e­fited from sell­ing a niche prod­uct.

Given that it is a niche prod­uct, your tar­get mar­ket will always pay for it, whether or not the local mar­ket or export mar­kets,” she said. Lebanese olive oil is some of the best in the world. We need to learn how to mar­ket it to make it grow and to posi­tion it the right way.”

Bechara added that she only exports her high­est-qual­ity extra vir­gin olive oils, which are now too expen­sive for most Lebanese peo­ple, half of whom live below the poverty line.

However, she said that lower qual­ity extra vir­gin olive oils remain a sta­ple in the coun­try and the mar­ket for those is still strong.

While a finan­cial bailout for Lebanon’s pro­duc­ers remains an unlikely prospect, Fares believes there are other mea­sures the gov­ern­ment could pass to help pro­duc­ers export their olive oils.

In the absence of any finan­cial means left to sup­port pro­duc­ers under the finan­cial cri­sis, one could only expect the gov­ern­ment to at least act on val­oriz­ing our offer­ing by pass­ing some reg­u­la­tions, such as a geo­graphic indi­ca­tion law that would cre­ate some prod­uct dif­fer­en­ti­a­tion on the inter­na­tional level; or accred­it­ing a lab­o­ra­tory for organolep­tic assess­ment of vir­gin olive oil,” he said.

However, Al Kaakour is not hold­ing his breath for this day and con­cluded that Lebanese pro­duc­ers are a bit like the trees they tend in the endemic home of olive.

Our ances­tors have been har­vest­ing and milling olive oil in Lebanon for more than 6,000 years,” he said. I am sure many have gone through worse sit­u­a­tions than nowa­days yet they still per­sisted. We will not give up either.”





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