Morocco: Grains drive down agricultural production
Morocco has postponed plans for major soft wheat imports based on expectations of maximising the return on the 2011/12 domestic cereals harvest. The extension of the crop collection, as well as government support to maintain a high purchase price to local farmers, is a key part of the country’s strategy to use agriculture not only as a tool to strengthen economic output and reduce poverty, but also to improve the balance of payments. However, the country still needs to increase soft wheat stocks, which is complicated by rising global cereals prices.
Uncharacteristically dry weather conditions in February and March 2012 cut the domestic cereals harvest from 8.4m tonnes in 2011 to only 5.1m tonnes in 2012, a 39.1% year-on-year (y-o-y) reduction. The 2012 harvest included 2.74m tonnes of soft wheat, 1.13m tonnes of durum wheat and 1.2m tonnes of barley. In 2010/11, 4.17m tonnes of soft wheat alone were harvested locally.
The planted surface area remained steady at 5m ha, meaning that average yield decreased by 38% to 1.01 tonnes per ha. However, rain returned in late March and April to help preserve the quality of the crop, easing earlier fears that national cereal production could drop as low as 3m tonnes.
A weak harvest means that Morocco will need to import a minimum of 4m tonnes of soft wheat before May 2013 to meet national demand – its highest import level in 30 years. However, the National Cereals Office (Office National Interprofessionnel des Céréales et des Légumineuses, ONICL), is not in a hurry to make its first major purchase of the current import campaign, which began in June, despite a restricted global wheat supply.
Key exporters Russia and the US both saw a major reduction in cereals output this year due to unfavourable weather conditions, and global prices are rising accordingly. Egypt and Algeria, the leading cereals importers in North Africa, have both made large soft wheat buys in recent weeks to ensure national supply through early 2013.
Morocco issued a tender on August 15 for 300,000 tonnes of EU-origin soft wheat under its preferential tariff agreement with the EU. No purchases were made, however, as market prices are well above Morocco’s reference price of Dh3300 (€299) per tonne. A tender issued the previous week for 300,000 tonnes of US-origin soft wheat similarly went unanswered. The government may need to move to reduce costs for importers and millers, or subsequent tenders will also be inconclusive. Most notably, the government indicated it will lift the 17% import duty on wheat in October, which should facilitate the season’s first buys.
In the short term, the government has decided to extend the national collection period by one month, putting off imports until October in hopes of maximising stocks of locally produced wheat. Morocco’s agricultural sector is characterised by small-scale and subsistence farming and as a result, much of the local production does not enter the national market. In 2011, only 53.7% of the soft wheat harvest entered the formal distribution chain, international media reported. In order to tempt farmers to sell their crops, the state indicated in August that it would continue to offer farmers Dh2900 (€263) per tonne of soft wheat until the end of September.
According to figures from the Ministry of Agriculture, the collection of soft wheat surpassed expectations, reaching 1.45m tonnes in mid-August; ministry officials hope this will climb to 1.75m tonnes by early September, comparable to 2011 collection levels. If so, this should meet the country’s milling needs through December 2012, with demand estimated at 450,000 tonnes of soft wheat per month.
Overall, poor weather conditions caused Morocco’s agricultural output to decline by 9.8% in the second quarter of 2012, compared to the same period in 2011. Agriculture contributed an average of 13.4% of GDP between 2006 and 2010. GDP growth slowed from 5.3% in the fourth quarter of 2011 to 2.6% in the second quarter of 2012, largely due to the agricultural slowdown, as well as a dip in tourism and consumption. The Ministry of Finance projects overall GDP growth of 3.4% in 2012, down from almost 5% in 2011.
Public spending on large-scale wheat imports will put further pressure on the national trade deficit. By the end of 2011, Morocco had accumulated its largest trade deficit in nearly 30 years, as the government increased spending to avoid an aggravation of social unrest. Morocco’s trade deficit was up 10% y-o-y between January and May 2012, reaching Dh84.4bn (€7.65bn), and this may climb even higher by the end of 2012 once the wheat import campaign picks up.
Yet, by extending the crop collection, Morocco seems to be making the most of a lacklustre agricultural year, looking to maximise the benefits locally before turning to expensive wheat imports. While decreased production in the 2011/12 season will dampen annual growth, large-scale investment in the sector, including a government goal to generate Dh10bn (€906.66m) in private agricultural investment annually, should help the sector to leap ahead under more favourable weather conditions.