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USDA GAIN: Oilseeds, Cotton, Sugar, Grain and Feed


15 April 2013

USDA GAIN: Morocco Grain and Feed Annual 2013USDA GAIN: Morocco Grain and Feed Annual 2013

The MY 2013/2014 grain crop is progressing well under favorable conditions. Total grain area is estimated at 4.97 million HA with wheat area estimated at 3.28 million HA and barley area estimated at 1.69 million HA. The Government of Morocco (GOM) has not issued its official grain production forecast yet, however many analysts expect the crop to reach 8 to 9 million MT.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed

Production:

The MY 2013/2014 grain crop in Morocco is progressing under favorable conditions with timely and sufficient rainfalls throughout most of the grain production regions. Cumulative rainfall significantly improved compared to the previous season, registering 395 mm from September 1, 2012 to March 28, 2013, which is about 26 percent higher than average.

Morocco’s total planted area (common wheat, durum and barley) for MY 2013/14 is estimated at 4.97 million HA, only slightly less (-1.4 percent) than last year and with about one third of the crop (1.6 million HA) seeded early. Wheat planted area is estimated at 3.28 million HA, about 4.4 percent higher than last year, consisting of 2.24 million HA of common wheat and 1.04 million HA of durum wheat. Barely planted area is estimated at 1.69 million HA, a 10 decrease from last year.

For the MY 2013/2014 crop, the government reported 54 percent of the sown area to be in a good condition, 24 percent is in average condition, and 16 percent is in a bad condition. Most of the wheat in bad condition is located in southern and eastern Morocco and is concentrated in the following regions: Marrakech-Tensift-Al Haouz (418,000 HA); Doukkala Abda (200,000 HA); Souss-Massa-Draa (79,000 HA); Chaouia-Ourdigha (48,500 HA); Taza-Alhoceima-Taounate (22,000 HA); and Guelmim-Es Smara (6,000 HA). The remaining 6 percent of sown area is irrigated production (347,900 HA) which is in good condition.

While the MY2013/14 crop is in good condition overall, there have been recent reports of wheat rust and septoria due to high moisture levels. The GOM has not released any assessment of the impact on production to date. However, the GOM has launched treatment programs in the regions of Berrechid, Chaouia-Ouardigha; Gharb-Chrarda-Beni Hssen; Rabat-Salé-Zemmour Zair; and Fès-Boulmane.

While it is still early to predict with certainty grain production for this season, it should be noted that the size of Morocco’s grain crop generally correlates with the area planted and the quantity and pace of precipitation from September to May.

The Government of Morocco initially projected total grain production at 7 million MT for MY 2013/14 in its 2013 GDP growth estimate. However, most analysts now believe that total production will range between 8 and 9 million MT. For PS&D tables, Post estimates that total wheat (common and durum) production for MY 2013/2014 will be about 5.9 million MT while barley production will be about 2 million MT, and accordingly we project that total cereal production will be about 7.9 million MT.

Government Support for Cereal Production

The Moroccan government has been encouraging farmers to use certified seeds by providing 40 to 60 percent of the cost. For the MY 2013/2014 crop, the government initially planned to increase the availability of certified seeds by 36 percent to 150,000 MT. Certified seeds provided under this program covered about 20 percent of the grain planted area. The government made 160,000 MT of certified seed available of which 130,000 MT were utilized, which was 18 percent higher compared to MY 2012/2013 crop. The certified seeds sales consisted of 70 percent common wheat, 29 percent durum wheat, and 1 percent barley. The government allocated initially a budget of 250 million DH ($28 million) to support certified seed use for MY 2013/2014 cereal crop. Other measures to support grain production include subsidies for farm machinery purchases and irrigation equipment that range from 30 to 70 of the purchase cost and subsidization of soil testing to optimize fertilizer usage. Marketed fertilizer up until February 15, 2013 was estimated at 670,000 MT, which is 17.5 percent higher compared to the previous season.

In September 2011, the Government of Morocco implemented a crop insurance program to help grain and pulses farmers deal with the risks associated with the impact of weather conditions on production. The crop insurance program, which exceeded its initial target of 300,000 HA for MY 2012/2013 crop, is projected to cover 500,000 HA for MY 2013/14 crop, which represents about 10 percent of Morocco’s total grain area. The program aims to mitigate financial losses due to droughts, floods, sand storms, and hail. The Moroccan Government will subsidize about 50 to 90 percent of the farmers’ insurance premium, depending on the size of the farm. The government intends to expand the area to one million HA by 2015.

Consumption:

Wheat consumption per capita in Morocco is estimated at 258 kg annually, which is among the highest in the world. In the past decade, consumption has been driven by rising population coupled with diversification of bread products; this is especially the case in major cities where the higher income population tends to concentrate. Common (bread) wheat is a politically and socially sensitive commodity in Morocco. The government devised a mechanism by which bread wheat prices have been successfully maintained at low levels and the government treasury has supported the difference in the costs. The Moroccan Government continues to subsidize more than one million MT of common wheat flour commonly known as “national flour” presumably to make flour available to the low-income consumers. The distribution of the subsidized flour is subject to heavy government control at all levels. The government has set up all processing parameters including the extraction rate, extraction margin, ex-mill prices, wholesale and retail prices. The wheat (whether local or imported through the national cereal office’s tenders) enters flour mills at the same price (2,600 DH/MT) for the standard quality and the government supports the difference. The government, however, does not get involved in marketing and pricing of durum wheat in the local markets.

There are about 152 common industrial wheat processing mills in Morocco with a capacity of about 9.5 MMT and about 50 durum and barley industrial processing mills with a capacity of 1.42 MMT. In addition, there are literally thousands of traditional small family-run wheat processing mills located mostly in small towns and rural areas. The wheat mills capacity is generally underutilized which has opened an opportunity for the wheat millers to process wheat for exports, especially to African countries (see export section). U.S. wheat is viewed by many Moroccan millers as an “enhancer” of flour performances, and hence some quality oriented mills have been buying it.

Barley is consumed mostly as animal feed in Morocco, with total consumption roughly estimated at about 3 million tons per year. With largely sufficient rainfalls from September to March of this year, pasture conditions have improved which will likely reduce demand for feed barley this year. As of February 2013, Morocco’s barley reserve was estimated at about 80,000 MT. Feed barley prices in the local market in mid-January were estimated at 3450 dirham per MT ($400), which is 7 percent lower than the same period the previous year. In 2013, barley prices registered a downtrend compared to 2012. As of March 2013, domestic barley prices were estimated at about 3340 dirhams per MT, compared to 2950 dirhams per MT for imported barley. The price difference between imported and domestic barley is expected to reduce barley imports this season.

Trade:

Wheat

Morocco has become one of the world’s major wheat importers in recent years. Morocco’s imports of common and durum wheat tend to fluctuate from year to year reflecting the swings in local production. Provided minimum specifications, Morocco remains a price oriented market and importers must compete with the cheaper origins.

From July 1, 2012 to March 1, 2013, Morocco’s wheat imports in MY 2012/2013 totaled 2.077 million MT, about equal to the same period in MY 2011/2012. Common wheat import totaled 1,614,300 MT, which was 1.77 percent lower compared to the same period in MY 2011/2013. Until March 2013, Morocco’s durum wheat import for MY 2012/2013 totaled 462,400 MT, which was 10 percent higher compared to the same period in MY 2011/2012.

In general, the EU wheat suppliers have a competitive edge over U.S. suppliers because of their proximity to the Moroccan market and their ability to export the small size shipments desired by the Moroccan buyers. In addition, the EU has larger wheat TRQs under the Morocco-EU free trade agreement. However, recently Black Sea suppliers have been gaining ground compared to EU competitors.

Up to March 2013, France’s wheat exports declined by 32 percent from 1.036 million MT to 0.7 million MT for MY 2012/2013. This market share loss (from 63 percent to 43.6 percent) was mainly replaced by Ukraine, which accounted for 39.5 percent of Morocco’s imports. Ukraine is expected to maintain a significant share of Morocco’s common wheat import market in the future. Nonetheless, France remained Morocco’s largest supplier while Russia maintained its 10 percent market share, and the United States remained absent in the market. Morocco’s durum wheat imports were supplied solely by Canada.

Post revised Morocco’s wheat imports for MY 2012/2013 down from 4.0 million MT to 3.3 million MT. The lower imports were mainly due to Morocco’s higher rate of domestic wheat collection and high international wheat prices, coupled with the government’s slow reimbursement of the import price differential to wheat importers under the restitution scheme. Post projects Morocco’s wheat imports for MY 2013/14 will total 2.7 million MT due to the expected larger crop.

Barley

For MY 2013/14, Morocco imports are forecast to total 250,000 MT. This is mainly due to improved rainfall that increased pasture coverage and hence lowered demand for feed barley imports. It is important to note, Morocco’s MY 2011/2012 barley imports soared by 330 percent to reach 611,200 MT. France dominated the market with a 38 percent market share, followed by Argentina (26 percent), Turkey (10 percent), Ukraine (9 percent), Russia (9 percent), and the U.S. (4 percent). The increase was mostly due to a higher demand for feed barley and the implementation of a government subsidy scheme to help the Moroccan livestock farmers cope with the drought and cold weather conditions that affected the MY 2011/2012 barley crop.

During the period July 1, 2012-March 1, 2013, Morocco imported 78,100 MT, a decline of 63 percent, compared to the same period in the previous year. France supplied about 90 percent of Morocco’s barley imports for the mentioned period. Due to improved pasture conditions, Post revised Morocco’s barley imports for MY 2012/2013 down from 300,000 MT to 250,000 MT. For MY 2013/2014, Post estimates barley imports will be around 250,000 MT.

Morocco’s local barley production normally covers about 80 to 90 percent of its domestic demand with imports making up the rest. Given that only a small portion of locally produced barley goes through official collection channels, it is difficult to differentiate how much is used for human food consumption versus animal feed. Domestically produced food barley is used for bread making and/or mixed with whole wheat flour for use in some traditional dishes, including couscous. During last year’s drought many small farmers used barley for human consumption rather than animal feed.

Barley consumption as animal feed fluctuates heavily depending on pasture conditions. Sheep production is most dependent on pasture lands with farmers using barley grain as a secondary provision. Barley is also used in the feed processing sector for cattle and dairy production. According to the Ministry of Agriculture’s latest inventory, Morocco had an estimated 17 million head of sheep and 2.7 million head of cattle in 2010.

Morocco’s barley imports for brewing average about 15,000 MT per year and are relatively stable.

Moroccan Flour Exports

Although Morocco is a net importer of wheat, it exports limited quantities of wheat flour to neighboring African countries. Morocco’s wheat flour exports reflect the excess milling capacity in the industry; hence, millers have been able to process wheat cheaply for export destinations.

Stocks

Grain stocks held by farmers fluctuate significantly in Morocco, and they are very difficult to assess. Stocks held by agents licensed by the Cereal Office (grain merchants, cooperatives, processors) and government managed port silos are normally known.

In CY 2013, Morocco’s total storage capacity remained unchanged compared to CY 2012 and totaled 4.48 million MT. More than 50 percent of the storage capacity is concentrated in the regions of Fes- Boulmane, Casablanca and Doukkala-Abda. The wheat stored at these silos accounts for about 10 percent of the total stored wheat in the country.

Morocco’s wheat reserve as of January 31, 2013 totaled 1.3 million MT, which was 8 percent higher compared to the same period the previous season. The Moroccan government policy concerning the strategic wheat stocks is to maintain available wheat supplies to cover three months of wheat consumption. As of March 2013, the wheat reserve was estimated at 1.1 million MT, which covers less than three months of local industrial millers demand. This was mainly due to lower wheat imports in January and February 2013.

Storage Facilities and Port Handling

A large silo facility with a storage capacity of 42,000 MT and discharging capacity of 16,000 MT/day that was built by a private Moroccan investor in Jorf Lasfar port in 2008 is now fully operational. This facility contains two 400 MT/hour screw conveyors and a conveyor belt with a capacity of 800 MT/hour. The Jorf Lasfar port currently has the deepest berth (12 meters) of all grain docks in Morocco and is capable of handling grain ships with loads up to 40,000 MT. Another private sector silo with a storage capacity of 66,000 MT (operational capacity of 55,000 MT) was built by a Moroccan company in the port of Casablanca. This facility expanded the total capacity of the Casablanca Port to 110,000 MT.

Policy:

Morocco imposes tariffs on wheat imports on a periodical basis in order to protect the local grain producers from foreign competition. The government usually intervenes when the supply and demand situation in the local market requires such intervention. With mounting pressure from rising wheat prices on the international markets, Morocco suspended the 17.5 percent import duty for common wheat from October 1, 2012 until December 31, 2012. Effective January 2013, Morocco extended their suspension of common wheat import duties until April 30, 2013 and reestablished durum wheat import duties to 2.5 percent until May 31, 2013. Durum wheat import duties are expected to increase to 170 percent beginning June and then be reduced sometime later in the year. According to the FTA, the applicable import tariff rate for durum wheat is 18.8 percent.

From October 1, 2012 until December 31, 2012, the Moroccan government implemented a wheat import restitution scheme that was extended in January until April 30, 2013. The objective of the scheme is to alleviate the impact of rising wheat prices and ensure sufficient supplies in the Moroccan market. Through this subsidy scheme, Moroccan wheat importers are reimbursed for 85 percent of the difference between a government reference price (2600 dirham/MT, about $292) and the wheat prices in the international market. This compares to 100 percent reimbursement under the previous scheme.

The allocated budget to support wheat imports from October 1 to December 31 was initially estimated at 1 billion DH ($116 million). Morocco’s common wheat imports during this period reached 1.38 million MT, corresponding to a subsidy of 832 million DH. In this case, Morocco utilized 83 percent of its initial restitution budget, which is explained by a higher domestic wheat collection rate, which reduced wheat import demand. During the extension phase effective until April 30, 2013, the government did not limit the quantity or budget for the restitution scheme.

Tariff Rate Quota for MY 2013/2014

Moroccan wheat imports are subject to two sets of tariff rate quotas (TRQs) established under two separate trade agreements, one is with the European Union and the other is under the U.S.-Morocco Free Trade Agreement (FTA). Under these agreements, the TRQs for common wheat depend on the size of the local wheat crop in any given year. The implementation of the FTA with the U.S. continues to face some difficulties due to the divergence between the U.S. and the Moroccan government in the interpretations of the agreement concerning the reference year used to compute the size of the quota, as well as the administrative procedures for implementing the TRQs.

Given the size of the Moroccan wheat crop in MY 2011/2012, the tariff rate quotas (TRQs) for U.S. common wheat exports under the FTA were set at their minimum level of 360,000 MT for CY 2012. On August 13, 2012, Morocco’s tender to import 300,000 MT of common wheat from the U.S. under the TRQs was not successful. There was no participation from the Moroccan importers due to the soaring wheat prices on the international market and the lower wheat prices on the domestic market and an imminent suspension of import duties. The remaining U.S. common wheat quota of 60,000 MT was not tendered in CY 2012. In CY 2012, the TRQ for U.S. durum wheat of 310,000 MT was rendered ineffective due to an import duty suspension throughout the year.

Given that Morocco’s common wheat production totaled 2.7 million MT during MY 2012/2013, the U.S. common wheat TRQ for CY 2013 is estimated at 548,592 MT. The durum wheat quota is estimated at 320,000 MT for CY 2013. On January 10, 2013, Morocco’s tender to import 160,000 MT of U.S. durum wheat under the TRQ was not successful due to lack of participation. On March 21, 2013, Morocco launched a second tender of 160,000 MT to fulfill its obligation for durum wheat in CY 2013 that was also unsuccessful.

Barley under the FTA

Under the US-Morocco FTA, import duties on barley would be phased out in equal installments over 15 years. The base import duty for barley negotiated under the FTA was 35 percent. The tariff rate quota for CY 2013(the eight year of the agreement) is set at 16.3 percent.

Marketing:

Distribution Channels

Moroccan wheat farmers have the option to sell their production in the local markets if prices are more appealing than the minimum government guaranteed price. To sell at the pre-set government price, farmers must deliver their crop to licensed grain merchants, cooperatives, or millers. The pre-set price is for a standard quality and deductions or bonuses apply to take into account deviations from the standard quality.

Common wheat accounts for most of the grain that goes through the official distribution channels in spite of the yearly variations caused by the size of the harvest. As of March 2013, the total quantity of common wheat delivered by farmers through the official channels (authorized grains merchants, grains cooperatives, and wheat millers) was estimated at about 1.8 million MT, of which 99.3 percent was common wheat. The Moroccan Office of Cereal and Pulses (ONICL) collected 51 percent of the domestic wheat through biding to make subsidized flour. For MY 2012/2013, the wheat collection rate was exceptionally high and reached 64 percent compared to 50 percent the previous year.

In MY 2012/2013, grains merchants, flourmills, and cooperatives accounted for 69 percent, 26 percent, and 5 percent, respectively, of the grains collected through the official channels.

U.S. Wheat Marketing Activities

The U.S. Wheat Associates Office in Casablanca continues to implement market development and promotional activities to expand U.S. wheat exports in Morocco and other North Africa markets. These activities include the support of a milling school that is managed by the Moroccan Miller Federation, as well as other market development and trade servicing programs targeted at wheat buyers in the region. In December 2012, the U.S. Wheat Associates organized its annual Crop Quality Seminar in Casablanca for Moroccan end-users, including private millers, importers, and regulatory officials.

Prices:

Cereal farmers in Morocco have the option to sell their common wheat production to government licensed traders (grain merchants, cooperatives, and mills) at a preset price (2,600 dirham/MT) or sell it in the free market. Prices of other grains (including durum wheat and barley) are freely negotiated in the market place. During the period June 2012- to mid February 2013, common wheat prices in the local markets averaged 3,150 dirham/MT. For the same period durum wheat prices averaged 3,790 dirham/MT, while barley prices averaged 3,420 dirham/MT. Compared to the same period in the previous season, prices of the three commodities declined by 1.25 percent, 5.49 percent, and 9.76 percent respectively. The stability of common (bread) wheat prices in the local market during this period reflects the success the government’s measures have made in alleviating the impact of rising international wheat prices and ensuring sufficient wheat supplies in the Moroccan markets.

April 2013

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