Optimizing coffee cultivation and its impact on economic growth and export earnings of the producing countries: The case of Saudi Arabia.

Abstract

Coffee is one of the historical socioeconomic crops. It has received an increasing attention at the global level, due to its positive interlinkage with the economic growth and on the gross domestic product for most of the producing countries, particularly, developing and least developed countries. Saudi Arabia is one of the coffee producing countries that has a relative comparative advantage of coffee cultivation. Yet, coffee cultivation has not received as much attention in Saudi Arabia as that of producing countries around the world. This study aims to assess the current state of coffee cultivation in Saudi Arabia and to investigate the potential to optimize coffee cultivation in Saudi Arabia that maximizes the net national economic return and export earnings, given limitation of cultivated areas, local market activities, and international trade activities. The study statistically analyzed primary data collected from around (65) coffee farms and traders in the study regions at the south and southwest Saudi Arabia, and optimized coffee cultivation in Saudi Arabia using LINGO optimization software. Empirical results of the study revealed the great potential of Saudi Arabia to expand coffee cultivation at south and southwest regions to meet the escalating local demand and to increase its share at the world market up to 2%. Optimization of coffee cultivation in Saudi Arabia showed a high potential to meet the local demand for coffee by producing 80.07 thousand tons grown over 2861.78 hectares and to generate a net return equivalent to $395.72 million a year, which is equivalent to $138.28 thousand per hectare and $4.94 thousand per ton of coffee. Optimizing coffee cultivation will play a substantial role to increase market share of Saudi Arabia to about 1–2% of the world market by increasing its export volume, respectively, to about 69.66 and 112.56 thousand tons, the national net economic return by about $395.86 and $395.95 million a year, and the export earnings of coffee by about $219.43–354.57 million a year, which in turns, will serve the national strategic trend to diversify the economic base and lower the dependency of incomes generated from oil exportation.