Algeria: Boosting wheat stocks
Algeria is taking several steps to improve its cereal production capacity in order to meet local demand for wheat and decrease its food import bill. However, the current market climate, impacted by decreased production in North America and climbing global prices, has reinforced the country’s dependence on wheat imports in the short term.
The country started the year with a rosier outlook for national cereal production. Local output can range between 2m and 6m tonnes, depending on rainfall; Ministry of Agriculture officials estimate that the total grain harvest may reach 5.8m tonnes in 2012, up from 4.2m tonnes produced in 2011 as a result of particularly poor weather conditions.
However, Algeria will remain dependent on imports in the medium term to meet the domestic demand for cereals, estimated at around 7m tonnes per year. Demand for milling wheat alone is estimated at 450,000 tonnes per month.
In line with the country’s agricultural performance, the value of cereals imports was down 23% in the first half of 2012 compared to the same period in 2011, from €1.66bn to €1.27bn. Wheat imports alone dropped by 33% over the same period to reach $1.01bn. The government announced in June that locally produced durum wheat would suffice to meet national demand through the end of the year.
However, complications have since darkened that outlook. The Algerian Cereals Office (Office Algérien Interprofessionnel des Céréales, OAIC) confirmed in August that the durum harvest was weaker than expected, complicated by unspecified logistical difficulties in collecting the durum crop. As a result, the OAIC went against its policy objectives to purchase 500,000 tonnes of durum wheat at €329 per tonne the week of August 13, sourced primarily from Canada, as well as the US.
Algeria has also made major purchases of milling wheat in recent weeks to offset both insufficient national production and decreased global wheat supply in 2012. Severe drought in the US and uncharacteristically dry weather in other producer countries, such as Russia, have created concerns about global wheat supply levels and sharp price hikes as importers move to increase stocks.
The OAIC purchased 350,000 tonnes of milling wheat on August 16 at €273 per tonne, with prices varying according to the shipping period and volume sold. This tender is the country’s third major buy in as many weeks and was issued to take advantage of a brief drop in global prices. Most of this wheat is expected to come from France, which has rebounded after initial concerns of a weaker 2012 harvest.
The cereals office also purchased 225,000 tonnes of milling wheat at €279 per tonne, as well as more than 400,000 tonnes during the last week of July. The three purchases combined are expected to meet Algerian demand for milling wheat in September and the first half of October.
Grain cultivation in Algeria has traditionally been limited by unreliable rainfall and low levels of irrigation. While the country will remain a net importer of cereals in the medium term, the government is working to increase local production through mechanisation and irrigation programmes. Cereal output has already grown from 800 kg per ha in the 1980s to roughly 1800 kg per ha in 2012; with improved agricultural infrastructure and techniques, the government has indicated it ultimately hopes to boost cereal production to 4000 kg per ha.
The national agricultural strategy aims to increase the irrigated land surface for cereal cultivation from 1.1m ha to 1.6m ha by 2014. A recent report by the Bureau for Rural Development Studies (Bureau National d’Études pour le Développement Rural, BNEDER) identified 1.2m ha of agricultural land to be irrigated under a new national programme. BNEDER estimated that, if it were to move ahead, the programme would cost €1.48bn; the Agriculture and Rural Development Bank has indicated that it would be willing to contribute to the project funding.
The OAIC has also reportedly invested €98.95m over the last three years to boost equipment stocks and aid the mechanisation of the agricultural sector. The national press agency reported in July that the OAIC had acquired a total of 1250 combine harvesters, 350 tractors and more than 1000 seed drills, which should help to increase access to machinery for small- and medium-scale producers and ultimately boost national output.
Price volatility as a result of declining global wheat production has reinforced the importance of reducing dependence on grain imports. While Algeria continues to face unique climate challenges, the agricultural sector has much room for improvement. Recently launched initiatives to improve mechanisation and irrigation should help to maximise Algeria’s agricultural potential in the medium term.