As a key sector of the Moroccan economy, agriculture contributed 13.2% of GDP in 2011, up slightly from an average of 13% between 2006 and 2010. Poor weather conditions in the first quarter of 2012 significantly reduced the seasonal output of many crops, which had a negative impact on the economy as a whole. However, the sector is expected to continue expanding in the coming years as domestic demand grows and progress is made on the sector’s development strategy, the Green Morocco Plan (Plan Maroc Vert, PMV). The PMV stands to boost both export value and income in rural areas, but in order to meet its ambitious targets, the kingdom will need to generate considerable investment from the private sector.
STRATEGIC APPROACH: On average, agricultural products represent 12% of the overall value of exports, making them an important source of foreign exchange receipts. Agriculture is already a key source of jobs, representing 40.3% of total employment as of June 2012, and up to 76.4% of employment in rural areas. However, agricultural products also range between 14% and 24% of the value of imports, depending on the seasonal production levels, given the country’s current reliance on imported wheat, sugar, cooking oils and powdered milk. Nevertheless, Morocco has enormous potential to expand agricultural production, both to meet domestic needs and to increase revenue from high-demand export crops.
The government launched the PMV in 2008 to address issues restraining sector growth, including fragmented production and insufficient levels of both irrigation and mechanisation. The PMV includes two strategic pillars: the first aims to increase the value-added of the sector by developing high-revenue crops for export, while the second aims to develop agriculture as a means of lifting rural populations out of poverty. The PMV plans for 1506 projects between 2010 and 2020, for a total projected investment of Dh147bn (€13.1bn). The state has committed to provide approximately one-quarter of this financing, or Dh35bn (€3.1bn). However, in order to meet these goals, the government aims to generate roughly Dh10bn (€889m) in private sector investment each year (see analysis).
While the sector plan is ambitious, it has seen consistent progress in the first two years of implementation. From 2010-11, 111 projects were launched under pillar I for a total investment of Dh26bn (€2.3bn), and another 224 projects under pillar II for Dh8.8bn (€785m). If this pace continues, the PMV stands to significantly boost agricultural production and improve sector organisation in the long term.
However in the short term, agricultural output has been greatly affected by poor weather conditions, a rude change from a strong performance the previous year. After having contracted by 1.5% in 2010, sector GDP expanded by 5.6% in 2011, making it one of the key factors supporting overall GDP growth.
The 2011/12 agricultural season was marked by a period of drought from January 2012 to March 2012, with an exceptional two-month cold wave in January-February 2012. As a result, sector output in the second quarter was down by 9.8% compared to the same period of 2011. This dip had an impact on economic growth, which slowed to 2.6% in the second quarter of 2012 from 5.3% in the fourth quarter of 2011.
CEREALS: Cereals were one of the market segments most affected by the dry weather, which cut the domestic harvest by 39% from 8.4m tonnes in 2011 to only 5.1m tonnes. The 2012 harvest included 2.74m tonnes of soft wheat, 1.13m tonnes of durum wheat and 1.2m tonnes of barley. The planted surface area remained steady at 5m ha, meaning that average yield decreased by some 38% to 1.01 tonnes per ha.
However, rains returned in late March and April 2012, which eased first-quarter fears that national cereal production could drop to as low as 3m tonnes and helped to preserve the quality of the crop.
IMPACT ON IMPORTS: 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 levels in 30 years. The National Cereals Office decided to extend the collection period by one month, leaving a 17% duty on wheat imports in place until October 2012 in hopes of maximising the return on the domestic harvest.
SIZE MATTERS: Morocco’s agricultural sector is characterised by small-scale and subsistence farming; over 70% of all farms are smaller than 5 ha. As a result, much of cereal production does not enter the formal market. In 2011 only 53.7% of the soft wheat harvest was used in the formal distribution chain. To prompt farmers to sell their crops, the state indicated in August 2012 that it would continue to offer Dh2900 (€259) per tonne of soft wheat through to the end of September.
“The quality of agricultural produce could be much better, but modernisation of the agricultural sector is still in its infancy,” Mohamed Khalil, president director-general for Dari Couspate, a large couscous and pasta company headquartered in Salé, told OBG. “However, the objectives for improved production are ambitious. For example, by 2020, 50% of all wheat consumed in Morocco would be homegrown.”
THE BASELINE: Bank Al Maghrib’s baseline scenario for 2013 forecasts annual cereal production of 6.8m tonnes, assuming normal precipitation and given the quality of the crop. A return to normal output should boost agricultural GDP, although cereal production may be affected in the long term by government efforts to more effectively employ land for cultivation of high-value crops. Roughly 65% of the total 8.7m ha of agricultural land is devoted to cereals. The share of crops other cereals has been increasing in recent years, making the sector more diversified than before and growth more resistant to decreases in cereal production. While cereals represent over half of total surface area, they provide 19% of sector GDP. Cultivation of garden vegetables like tomatoes, cucumbers and onions provides 13% of sector GDP while occupying 3% of land.
Another 11% of agricultural land is devoted to fruit plantations, which are a key source of export revenues and a priority for development under pillar I. Of the remaining land, 4% is dedicated each to legumes and animal feed, 2% for industrial cultivation, which primarily consists of sugar cane and beets, and 1% for olives and other oil producing plants. A further 1.5m ha of land were fallow in 2011. In order to maximise the sector’s value-added, the PMV aims to convert some cereal plots to higher-earning crops, although the surface area set for conversion has not been specified.
FRUITS & VEGETABLES: By 2020, pillar I of the PMV aims to increase the value of agricultural exports from Dh8bn (€711m) to Dh44bn (€3.9bn), primarily by developing high-potential sectors such as citrus, fruits and vegetables, and olives. However, 2012 was a difficult year for exports. The value of fresh vegetable exports was down 28.9% in the first 10 months of 2012, generating receipts of Dh1.35bn (€120m) compared to Dh1.9bn (€169.5m) in the same period of 2011. The cultivation of garden vegetables covered 257,000 ha in 2011, with an annual production of 7.55m tonnes. The sector is set to receive Dh21bn (€1.87bn) in investment between 2010 and 2020 under the PMV to boost exports. Tomatoes are the star product of this segment, with a cultivated surface covering 17,000 ha for a yield of 1.2m tonnes in 2011. Approximately 90% of tomato exports go to the EU, compared to 5% for Central and Eastern Europe and 4% for Gulf countries.
OLIVES & OILS: Over 900,000 ha were devoted to olive cultivation in 2011, with production of 1.42m tonnes, down slightly from 1.5m tonnes in 2010. An exceptional harvest in 2010 led to a sharp uptick in the consumption of olive oil in Morocco, at the expense of soybean and sunflower oils, and the shift of some production toward exports. The government applied Dh2 (€0.18) per kg on exported olive oil, essentially a subsidy for export diversification, to increase the country’s competitiveness on international markets. Adverse weather conditions slashed olive oil production in the 2011/12 season, however, meaning that domestic prices are likely to rise again. Nevertheless, programmes related to the PMV are projected to raise oil consumption in Morocco by 2.4% by 2014. The strategy aims to increase olive production to 1.3m ha and 2.5m tonnes by 2020, with targets to increase exports to 120,000 tonnes of oil and 150,000 tonnes of table olives.
Fruit also has high potential to boost export receipts. In 2011 plantations covered 1.4m ha and yielded 115,600 tonnes of fruit. The export value of two key crops, strawberries and raspberries, was down by 10.7% in the first 10 months of 2012 compared to the same period in 2011, from Dh1.04bn (€92.5m) to Dh928m (€82.5m). Exports are expected to recover in the 2013 season, provided weather conditions return to normal.
Citrus fruits were also hard hit in 2012; the drought period was followed by unseasonably high temperatures in May and June that caused the loss of 20-30% of the citrus crop. The Ministry of Agriculture and Fisheries said in October 2012 that citrus production was expected to fall by 25% for the 2012 season. Tangerines and oranges are each expected to dip by over 20% to 675,000 tonnes and 763,000 tonnes, respectively. However, grapefruit, lemon and pomelo production are projected to rise by 38% to reach a combined 62,000 tonnes.
CONCENTRATE ON CITRUS: Nonetheless, significant potential remains for this segment. Morocco is the third-largest citrus fruit exporter on the continent after South Africa and Egypt. The country produced a total of 1.7m tonnes of citrus in 2011 and exported 550,000 tonnes of oranges. Under the PMV, citrus production is slated to receive Dh9bn (€800m) in investment to increase the planted area to 105,000 ha for an annual output of 2.9m tonnes by 2018, of which 1.3m tonnes are to be exported. As of 2011, the European continent was the main export market for citrus, with Eastern Europe absorbing 60% of production, the EU 20%, followed by 9% for North America and 3% for the Gulf.
Industrial plantations of sugar cane and sugar beets have also garnered more attention under the PMV. They are seen as a means of reducing reliance on imports of raw sugar from Brazil and India. Yields of both crops were up in the 2010/11 season; 3m tonnes of sugar beets were produced, up from 2.4m tonnes the previous year, and 764,000 tonnes of sugar cane, up from 632,000 tonnes in 2010. However, frost in early 2012 caused the loss of around 50-60% of the country’s sugar cane crop, according to domestic sugar producer Cosumar. “While the production figures for the sugar industry were down by over 50% in the past year, it is expected that they will be back to pre-2010 levels in a year or two, and may even surpass them,” Mohamed Fikrat, president director-general of Cosumar, told OBG.
MEAT & DAIRY: National milk production reached 2bn litres in 2011, two-thirds of which entered into industrial production, according to estimates by the CFG group. The government has committed to invest Dh2bn (€177.87m) in the sector and hopes to generate an additional Dh10bn (€889m) in private investment to reach production of 4.5m litres by 2020. In April 2012 Nestlé signed an agreement to invest Dh50m (€4.45m) by 2015 to encourage the aggregation of milk producers in Doukkala-Abda. This region accounts for 22% of national milk production; an estimated 43,200 dairy farmers are active in the region, with combined annual turnover of Dh1bn (€88.9m). By linking producers with a central organisation that can ensure financing flows, increase market access and provide technical support, projects like these should help to reach targets.
A CUT ABOVE: White meat production reached 520,000 tonnes in 2010, surpassing the target of 500,000 tonnes by 2013. Chicken is the largest source of animal protein consumed in the kingdom, representing 55% of the total. That said, Moroccan eat less poultry than their European neighbours, at 17 kg per person compared to 30 kg in France. “The market for poultry meat is growing by some 7% per year,” Mustapha Slimani, President of the Board of Zalagh Holding, an integrated poultry and livestock group, told OBG. “It is the cheapest protein around, and thus has some good potential.”
Egg production is also expanding, improving from 3.3bn units in 2006 to 4.5bn units in 2010, and the PMV aims to reach production of 5bn units per year by 2013.
The red meat industry has progressed more slowly, however, due largely to the predominance of small-scale farms. The sector is set to receive Dh9bn (€800m) in investment by 2020 to encourage aggregation; of the 1050 red meat producers who already belong to collectives, 65% have between five and 20 animals. Red meat production, including beef, lamb and goat meat, reached 430,000 tonnes in 2011, according to ministry statistics, and the PMV is aiming to increase this to 450,000 tonnes by 2014, including production coming from slaughter houses and that during Eid festivities.
ENCOURAGING AGGREGATION: One of the principal goals of the PMV is to fund aggregation projects, which group producers around a central organiser, thereby improving farmers’ access to high-quality materials and strengthening the link between upstream production and downstream processing, in addition to increasing exports. Since 2010, Dh26bn (€2.3bn) has been invested in the launch of over 100 aggregation projects, 34 of which are currently operational. These projects are concentrated in segments that are either especially fragmented, namely cereals, dairy products and red meat, or have significant potential to increase sector turnover, such as citrus fruit, olives, and vegetables.
“Aggregation is the future of Moroccan agriculture,” Redouane Arrach, head of the statistics division at the Ministry of Agriculture and Fisheries, said. “The model is taking time to spread, as there was little precedent for it in this highly-fragmented sector. However, existing projects have reduced production costs, increased efficiency, and encouraged the use of modern techniques for irrigation, mechanisation and fertilisation.”
FISHERIES: Fisheries represent around 2-3% of GDP and present a considerable opportunity for growth. The tonnage hauled increased some 20% year-on-year ( yo-y) to reach 895,235 tonnes in the first 10 months of 2012, but the value held steady at Dh4.1bn (€364.5m). The largest catches are made in the south near Agadir and Tan Tan, and particularly near Laâyoune and Dakhla in the Moroccan/Western Sahara. All but 20,000 tonnes of seafood are currently caught off of the Atlantic coast, representing approximately 94% of the total value through October 2012.
Over 70% of fisheries GDP comes from exports, particularly of locally processed products. In 2011, frozen fish accounted for a majority of seafood exports (40%), followed by canned fish (27%), and fish oils and fishmeal (22%). Europe absorbs almost all of Morocco’s exports of fresh fish and remains the most important export market for frozen fish and fishmeal. However, Africa is growing as an export market for canned fish and surpassed Europe in 2011 to import 46,673 tonnes of canned fish worth Dh1.27bn (€113.3m).
The sector development strategy, Plan Halieutis, was launched in 2009 and aims to increase sector GDP to €1.6bn and export value to €2.33bn by 2020, through the implementation of 16 projects in key fishing zones of Tangier, Agadir and Laâyoune. The development of aquaculture is an important component of this strategy. Fish farming remains marginal, with less than 1000 tonnes produced in 2011, restrained by issues such as land availability, expensive start-up costs and heavy dependence on export markets. However, the government has high hopes for the sector. Plan Halieutis set the goal of raising annual production to 200,000 tonnes by 2020 for a turnover of Dh5bn (€444.5m). For Has-san Sentissi, president of the National Federation of Seafood Processing and Development Industries, aquaculture presents a considerable opportunity for growth. “The realisation of the ambitious sector goal of producing 200,000 tonnes in 2020 will depend to a large extent on the level of demand in international markets and the ability of government incentives to stimulate production,” Sentissi told OBG. In the short term, the National Agency for the Development of Aquaculture launched a call to tender in October 2012 for the construction of nine aquaculture farms ranging between 20 and 40 ha on the Mediterranean coast, expected to generate a total investment of Dh295m (€26.2m).
WATER RESOURCES: Irrigated fields account for 15% of total agricultural land, but contribute up to 45% of the sector’s value-added and 75% of agricultural exports. Morocco receives an average of 29bn cu metres of precipitation per year, according to Ministry of Agriculture and Fisheries figures, of which roughly 20bn cu metres could to be mobilised.
The PMV’s National Plan for Economising Water Use in Irrigation aims to see 550,000 ha covered by localised irrigation projects by 2020. The initiative has a Dh37bn (€3.3bn) budget and aims to save 1.4bn cu metres of water per year. The negative impact of the three months of drought early in 2012 highlights the importance of these programmes. However, as agriculture expands, demand for water resources will continue to rise.
FINANCING GROWTH: Public investment in agriculture has increased considerably in recent years, as the government works to harness its potential for economic development. State investment rose from Dh4.6bn (€406.2m) in 2008 to Dh6.5bn (€579.8m) in 2011, with a peak of 13% y-o-y growth in 2011. Public assistance, in the form of subsidies and other incentives, more than doubled from Dh1.5bn (€132.5m) in 2008 to Dh2.3bn (€205.2m) in 2011. Much of this assistance is disbursed from the Agricultural Development Fund (Fonds de Développement Agricole, FDA). The FDA also aims to encourage private sector investment in agriculture through the application of strategic incentives and subsidies that channel funding into priority areas. The new subsidies scheme, which came into effect in March 2010, aims to increase production of strategic crops and to improve sector organisation by incentivising aggregation, mechanisation and improved usage of water resources. For example, the FDA subsidises 80% of the cost for individual farmers to improve water storage capacity and install localised irrigation systems, and covers 100% of these costs for farming collectives. The FDA also subsidises between 20% and 30% of the cost of farming equipment such as tractors and combine harvesters. Additional subsidies are offered for projects to commercialise or store high-quality, certified seeds to boost product quality, particularly for staple crops that are processed and consumed locally such as cereals, sugar cane and sugar beets.
INSURANCE: The Ministry of Agriculture oversaw the creation of a new agricultural insurance scheme in partnership with the Moroccan Mutual Agriculture Insurance Agency (Mutuelle Agricole Marocaine d’ Assurances, MAMDA). Prior to 2011, insurance was available only for cereal producers to protect against drought. However, the new “climate multi-risk” insurance programme protects producers of nine different grains and legumes against various adverse weather. The insurance covered 300,000 ha of operations at its roll-out in the 2011/12 season, and the Ministry of Agriculture aims to extend coverage to 1m ha by 2015. The first payments to farmers affected by the poor weather in early 2012 were disbursed by MAMDA in June last year, a factor that could boost insurance penetration.
AGRO-INDUSTRY: Morocco’s agro-business sector is dominated by several established national firms. The country’s sole brewery, Société des Brasseries du Maroc (SBM), is owned by the French group Castel and has a 98% market share for beer. Turnover rose 4.8% y-o-y to reach Dh2.3bn (€205.2m) in 2011 and is set to jump by another 4% to Dh2.4bn (€213.4m) in 2012. While beer represents almost all of SBM’s sales, non-beer growth is expected to represent 16% of turnover by 2020, mainly due to projected sales of Ain Ifrane, the bottled water brand SBM began marketing in July 2010.
Centrale Laitière, acquired by the French group Danone in July 2012, is Morocco’s key producer of milk and other dairy products. While global prices of inputs such as powdered milk, cardboard and plastic rose in 2011, Centrale Laitière kept prices steady; this helped to boost its market share by 4 percentage points to reach 63% in 2011. Turnover jumped 7% y-o-y to reach Dh6.6bn (€588.7m). Per capita dairy consumption reached the equivalent of 32 litres of milk in 2011, lower than the average of 65 litres in emerging countries, so there is room for improvement. However, the consumption of dairy products slowed to 2% growth in 2011, compared to 10-11% annual growth seen in the last three years, but may recover apace with economic growth.
Lesieur Cristal is Morocco’s primary producer of edible oils, with a 14% market share of olive oils and a 58% market share for seed oils. The company saw an improved performance in 2012, with turnover in the first half of the year reaching Dh2bn (€177.8m), up 19.8% from the same period the previous year. Projected turnover for 2012 is Dh4.13bn (€367.2m), up 7.5% yo-y. The firm maintains two plantations, a 560-ha plot in Meknes and a new 630-ha plantation in Marrakech, which will see its first harvest in 2013. Executives contend that with these investments, the firm’s market share in olive oil should increase to 17% by 2014. Indeed, the PMV is expected to further elevate olive oil production in the kingdom, according to Samir Oudghiri Idrissi, director-general of Lesieur Cristal. “Some 100, 000-120,000 tonnes is produced annually, but should go up to 200,000 under the PMV,” Oudghiri told OBG.
Finally, Compagnie Sucrière Marocaine (Cosumar) is the country’s sole sugar producer and typically meets 45% of domestic demand by refining locally produced sugar, as well as raw imports from Brazil and India. Turnover reached Dh6bn (€535.2m) by year-end 2011, up 4.3% y-o-y, and should continue to be driven by annual growth in domestic sugar consumption averaging 1.8%. To support local industry, the state had planned to cap sugar imports at 45% of annual demand by year-end 2013. However, with the reduced domestic sugar cane and beet harvest, the government delayed the measure until 2020. In the short term, Morocco will need to import an estimated 850,000 tonnes of raw sugar in the 12 months until end of May 2013.
STATE SELL OFF: The National Investment Company (Société Nationale d’Investissement, SNI) used to be a key stakeholder in agro-industrial companies, but as these firms have developed and their growth prospects have stabilised, the SNI has divested to focus on other developing sectors such as tourism, telecoms and renewable energies. The company’s first move was to reduce its 76.23% stake in Lesieur Cristal through two major sales in the first half of 2012: a 44% stake was purchased by Oléosud, a subsidiary of the French edible oil producer Sofiprotéol, and a 12.9% stake was sold to several Moroccan institutional investors, primarily insurance and retirement funds. SNI next divested from Centrale Laitière in July 2012, selling its 37.8% stake to France’s Danone for €550m. Danone is now the majority shareholder in Centrale Laitière with a 67% stake. SNI also holds a 63.5% stake in Cosumar and is considering divesting up to 40% of its shares in 2013.
OUTLOOK: Despite a difficult 2011/12 season, production is set to rise in the coming years under the PMV. Efforts to boost investment, restructure the sector and modernise agricultural practices should help to protect against future shocks. In addition, solid growth in agro-industry and efforts to develop aquaculture should also boost agricultural GDP. The complexity of Morocco’s agricultural value chain demands a higher level of current logistics services. However, in the medium term, the plan to enhance logistics infrastructure should help to better supply far-flung agricultural operations nationwide, as well as accelerate the arrival of products to port.
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