A favourable climate and proximity to both affluent Europe and the dry Middle East make Turkey a global breadbasket and a natural destination for investment. Foreign direct investment in the agriculture sector reached a record high of $2.1bn by October 2012, a 150-fold increase from a decade ago, according to the Ministry of Food, Agriculture and Livestock (MFAL). Incentives for private-sector investment, including low-interest loans, have helped attract considerable interest to Turkey. A competitive workforce in labour-intensive farming is another factor. The government is also developing infrastructure projects to irrigate farmland in nine provinces, seeking to double harvests and create a commodities centre.
Investment in Turkey is part of a wider, global interest in agribusiness. Investors have focused more attention on agriculture in the wake of the 2012 US drought, after which food priced soared. Simultaneously, as global populations swell, causing an increase in demand for food, investors are becoming more interested in Turkey, Europe’s biggest agricultural producer by value and one of the world’s top ten.
To tap into this, the government has focused on overhauling areas that hold back productivity, especially the fragmented farm structure and low levels of technology. This strategy will allow the country’s agriculture sector to keep up with the growing demand for food and better adapt to the effects of globalisation and climate change. Taking a longer-term strategic vision has been key to the government’s new approach, as opposed to the prior focus on day-to-day concerns.
Investors are taking heed. In recent years, Qatar, Saudi Arabia, Kuwait and the UAE announced plans to spend billions of dollars buying or leasing farmland. Other investment players are also taking interest, for example the European Bank for Reconstruction and Development’s (EBRD) $25m subscription of new shares in Tiryaki Agro, a commodities processor. This marks the London-based lender’s first such investment in the Turkish corporate sector. The EBRD was also behind a €20m loan to state-run Vakıfbank in 2012 to create a line of credit for small and medium-sized agribusinesses, part of the development bank’s larger €400m Turkey Agribusiness SME Financing Facility. Another investment player is the Egeli & Co. Agriculture Investment Trust, which became Turkey’s first venture capital investment fund focusing predominantly on agriculture.
Ripe For Reform
High levels of protection, inadequate irrigation, small and uneconomical farms, and limited access to capital for modern technology all slow growth, EBRD President Suma Chakrabarti wrote in a September 2012 editorial in Turkish newspaper, the Hü rriyet Daily News. He continued to explain, “countries like Turkey, with its fertile land and outward-looking companies, can do more to feed the world by increasing production at home and by successfully investing in agriculture beyond its own borders.”
Government policy still provides about TL9bn (€3.89bn) worth of financial support for farmers, according to the 2013 budget presentation by minister of finance, Mehmet Şimşek. This includes direct income support, and subsidised fuel and fertiliser. The state also offers premiums for cereals, teas and pulses, help for livestock and feed production, low-interest loans and irrigation equipment.
The US has argued that payments on wheat, feed grains and rice violate Turkish commitments under the World Trade Organisation. Agricultural support also exceeds that of the EU, which requires harmonisation with the Common Agriculture Policy if Turkey is to become a member. The Agriculture Law, passed in 2006, was a move towards fulfilling EU criteria.
It is easy to see why Turkey remains protective of its farm sector. Its contribution to GDP was 9% in 2011. A quarter of all jobs are in agriculture, with some 6.2m workers employed, the International Labour Organisation said. About 28% of all Turks live in the countryside, compared to about 35% in other upper-middle-income nations. The government expects the rural population to contract to 20% by 2025 and to 10% by 2050. Agriculture consolidation, when coupled with rapid urbanisation of the population, causes “a loss of agricultural production and decreasing agricultural development”, wrote researchers N. Enver Ülger of Okan University and Tayfun Çay of Selçuk University in a 2012 paper. In short, output per unit of land is low while costs are high.
The answer is to develop agriculture-related industries to replace lost farm jobs. Demir Şarman, chief executive of fruit grower and processor Anadolu ETAP, explained that food manufacturing would offset some of the labour dislocation. “While farms in Turkey are using fewer employees, food and beverage manufacturing plants have steadily increased their personnel,” Ş arman told OBG. “Increased productivity in agribusiness, through the use of technology and educated manpower, has helped Turkish producers lower their costs. Thus competitiveness in international markets has strengthened. This will, in turn, result in a higher level of utilisation of the country’s arable land, meaning the creation of new farms and more jobs.”
Already, about half of Turkey’s landmass of 783,562 sq km is farmland, according to the World Bank. Some 40,000 sq km of Turkish farmlands lie fallow, while 13% is irrigated. Turkey is improving irrigation, fertiliser use, mechanisation and seed quality, but agriculture output remains less than ideal, Ülger and Çay said. Fragmented land structures are the main hurdle.
Whereas European farms have an average area of 16 ha, the typical Turkish farm is 6 ha and the average number of parcels is six. This reduces plots to just 1 ha. This fragmentation is due mainly to the tradition of splitting land among offspring as inheritance, as well as selling parcels and dividing property with the construction of irrigation canals. “As parcels are dispersed and small, the necessity of more machinery and (labour) prevent mass agriculture. Production per unit decreases, and costs increase,” Ülger and Çay explained. It also raises fuel costs and wastes water.
Although Turkey is rich in agricultural land, overall production has been hampered by the fractured nature of the country's farms. The government is now making efforts to consolidate small, scattered plots of land into larger entities for modern farming enterprises to operate. About 2m ha of farmland have been consolidated so far, while another 14m ha are suitable for future consolidation initiatives.
Fruit & Veg
Crops make up about two-thirds of agricultural production, while livestock accounts for about 25% and fisheries and forest products round out the remainder. The UN Food and Agriculture Organisation (FAO) says Turkey is among the world’s top five producers of cherries, strawberries, peaches, figs, melons, watermelons, mandarin oranges, apples, chestnuts, walnuts, pistachios, hazelnuts, olives, lentils, chickpeas, green beans, peppers, tomatoes, cucumbers, eggplant, beets, tea, honey, poppy seeds and sheep’s milk.
Turkey is now the world’s biggest wheat-flour exporter, with its main markets in Iraq and Indonesia. It retained this title despite the fact that the wheat harvest contracted 7% to 17.5m tonnes in 2012, according to the US Department of Agriculture’s (USDA) annual report on Turkish grain and feed. Cold winter weather and heavy rainfall in the main wheat-growing region were to blame, it said. In 2012, Turkey’s total stock of wheat reached 1.5m tonnes and the country was estimated to have procured another 1.5m tonnes. With 7.5m ha of land set aside for wheat growing, Turkey has the largest wheat crop in the Middle East and ranks seventh globally, according to the World Bank. Cereals, along with legumes and oilseeds, are expected to bring in $5.6bn in exports in 2013, according to the MAFL.
Domestically, the feed industry accounts for a growing share of the grain harvest. Red meat output, mainly beef, reached almost 916,000 tonnes in 2012, a rise of 18%, according to TurkStat, the state statistics agency. Poultry meat rose almost 7% to 1.7m tonnes and egg production climbed 15% to 15bn units.
The USDA said that Turkey has imported 85,000 heads of breeding dairy cattle, mainly from the US, since 2009, but this is set to change. Worried about a growing current-account deficit, the government reintroduced curbs on foreign red meat and livestock at the start of 2013. These restrictions had been eased to meet domestic demand that drove meat prices to record highs, but local breeders complained they could not compete with the imports. “The ministry tries to encourage sheep and goat farming, and believes that Turkish red-meat production should come from sheep and goats,” the USDA wrote. The trade barrier on livestock is a common complaint from the EU and the US.
Turkish fisheries’ output rose 7.7% to 703,545 tonnes in 2011, the latest available data. Aquaculture accounted for a quarter of this, with nearly 2000 farms. The eastern Black Sea dominates output, accounting for 62% of marine seafood, and anchovies made up nearly half of all saltwater output.
One out of four fish eaten in Europe is from Turkey, the Fishery and Animal Products Exporters Association said. By 2023, the government wants exports to grow six-fold to $3bn, making Turkey’s fishing industry Europe’s biggest, but some experts say that is too ambitious. “I think we will be forced to revise this target in the next five years because it is just not sustainable,” explained Tan Morgül, a local journalist who specialises in the Turkish fishing industry. The answer is not simply more aquaculture. “Aquafarming has grown by about 10% in recent years, but the ecological sustainability is questionable,” said Morgül. “The biggest threats [to the fishing sector] are overfishing, pollution, damming of rivers that feed the Black Sea, and lax regulatory frameworks and penalties for illegal fishing.”
The World Bank reports that 99% of the rural population has access to 20 litres of water per day from an “improved” water source, defined as a household connection or well within 1 km of home. This is a marked improvement from a decade ago, when only 90% of rural inhabitants had access.
Agriculture consumes nearly three-quarters of Turkey’s freshwater resources, compared to about 40% in high-income countries. Pressure on water resources will continue to grow in line with output, according to the Union of Chambers of Turkish Engineers and Architects. The union recommends that the state step up the use of reclaimed wastewater, reduce network losses, develop more efficient technology for irrigation and raise tariffs to discourage waste. Such steps would also be good for business, because investors want to see sustainable agriculture as they seek longer-term returns. Limiting the impacts on resources means preserving Turkish farmland’s ability to produce for the future and ensuring that agribusinesses can continue to operate.
“Agriculture is still an important part of the economy, and it is imperative that farmers focus on improving their efficiency by adopting modern production and conservation strategies,” said Mehmet Reis, chairman of Reis Gıda, which processes legumes, rice and cereals. “Export-oriented companies are not only dependent on the performance of global markets, but also on the domestic regulatory environment, which needs reform in areas such as tax policy and Customs.”
The Association for the Inspection and Certification of Food and Supplies (GİMDES) was established in 2009 to help Turkish producers tap into an $860bn global halal market catering to devout Muslims. Turkey exported some $10bn worth of halal goods in 2011, GİMDES said. In addition to the halal sector, Turkey has spent over a decade cultivating an organic farming sector, now a TL250m (€108m) business, according to the Organic Producers and Industrialists Association. Ninety percent of organic output is exported, overwhelmingly to Europe, which has strict licensing.
Turkey wants to see total agricultural exports more than triple to $40bn over the next decade, part of the government’s “Vision 2023” of economic targets that includes overall exports of $500bn. Ideal ecologic conditions, a well-developed industry, rising global demand and government support for investment make this a realistic target. The government vows to do more, including opening consulting offices in various countries, signing trade agreements to gain access to new markets, consolidating land holdings further, increasing mechanisation and raising productivity.
There are also a number of risks, including lagging reforms and some government supports that distort production and trade. Addressing these risks, encouraging more research and development, preparing for the impacts of climate change and better protecting natural resources will help Turkey achieve its lofty aims.
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