The Lebanese government decided to step in and increase state subsidies for flour after the country's bakers briefly raised the price of flat bread by 30%, from $1 to $1.33 on June 26.

On June 27, the ministry of economy and trade announced it would increase flour subsidies from $200 and $220 - depending on grades - to $250 per tonne to reduce the cost for the consumer. "With international flour prices currently around $460 a tonne, the state is meeting around half the cost of the country's daily loaf, with the ministry saying the subsidy would drain off at least $60m from the budget this year."

The government's move defused the threat of protests over rising bread prices, with the country's General Labour Confederation (GLC) calling off a planned demonstration, though the organisation warned it would not hesitate to call a general strike if there were further increases in the price of bread.

While the government's decision may have eased tensions and helped keep bread on the table for now at least, Kazem Ibrahim, the president of the Union of Bakeries, warned that price support for flour was just one of the issues faced by his members, with mounting costs of power and fuel also making conditions more difficult.

Lebanon is particularly susceptible to food price fluctuations on the international market, as it imports up to 70% of its food requirements.

US Department of Agriculture statistics state that Lebanon imported 300,000 tonnes of wheat in 2007. Although much lower than the 1999 peak of 459,000 tonnes, it still represents a significant expense for both the country and the government through its subsidies.

To counter import-dependency, there has been a concerted push to increase local wheat production, with 50,000 ha of land now under cultivation, up from 36,000 a decade ago. However, last year's harvest of 140,000 tonnes met less than a third of the country's requirements, suggesting Lebanon's bread prices will come under more pressure from any further increase in global wheat tariffs.

It is not just the cost of putting bread on the table that is becoming an issue for the Lebanese food industry. Selling the country's agricultural produce abroad and expanding the sector is also becoming harder.

According to George Nasrawi, head of the syndicate of Lebanese food industries, exports have been hit by rising health and safety standards. While there was potential for the Lebanon's agriculture sector to expand, the EU in particular should take more responsibility about the standards it sets, Nasrawi told an agribusiness conference in Beirut on June 26. It is costly to implement EU production requirements and in many cases Lebanese food industries cannot afford to meet them, he was reported as saying.

Issues of quality were also raised by Economy and Trade Minister Sami Haddad, who said it was essential to build on the international market for Lebanese agricultural products. To do this, Haddad said, the food industry had to "abide by local and international standards on food safety and quality," adding that his ministry had prepared a draft law on food safety and quality standards, which was adopted by the government and sent to parliament for ratification.

Part of the issue is that, while the EU has lowered tariff barriers on many Lebanese goods, as a result of the EU-Lebanon Association Agreement that was ratified in February 2006, it has also ramped up quality requirements, setting control and monitoring standards that the country's agriculture sector cannot meet, especially on pesticide levels.

More upbeat was Ali Berro, an official with the economy and trade ministry's Quality Programme, who told the conference that agricultural exports had risen in value to $454m in 2006, representing 16% of the national total, from $181m (or 10%) in 2004. Despite this encouraging increase, Berro said the 2006 figure was still well short of the 28% share of exports enjoyed by the agro-food industry in 1999. It was also well short of the $1.6bn of food imports for 2006, as estimated by the United Nations Food and Agriculture Organisation (FAO).

One of the fundamental failings in the agriculture sector is a lack of investment. However, with 75% of Lebanon's farms having just one hectare of land or less, according to the FAO, most of the country's 200,000 farmers are ill-placed to upgrade technology or infrastructure in order to improve output, with 40% of farmland dedicated to subsistence farming only.

Although Lebanon has large tracts of fertile land and higher than average rainfall for the region, it remains unable to take full advantage of its agriculture sector. Perhaps the underlying reasons for Lebanon's failure to capitalise on its agricultural potential are a combination of failed export reforms, reliance on imports and state subsidies to supply domestic needs. Without significant change, farmers will struggle to reap a richer harvest.

Source: Oxford Business Group