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Morocco extends campaign to buy domestic soft wheat
More time for farmers to sell soft wheat harvest; Rabat seen delaying imports; Import duty may be lowered; could cost state more
August 23, 2012 11:40 by Reuters
Morocco’s cash-strapped government on Wednesday extended its drive to buy domestic soft wheat by a month, in a fresh sign the north African country is biding its time before carrying out its biggest campaign to import the grain in 30 years.
The agriculture ministry said the national campaign for the collection of the domestic soft wheat harvest would continue until end-September, citing an improvement in the quality of a crop.
This means that until then the state will continue to pay local farmers 2,900 dirhams ($330) per tonne for their soft wheat.
A massive shortage in the domestic cereal harvest comes at a sensitive time for the $92 billion economy, which is struggling to recover after racking up its biggest trade deficit last year in nearly 30 years.
With monthly milling needs at around 450,000 tonnes, Morocco will need to import no less than 4 million tonnes of soft wheat in the 12 months to end-May. The previous year, the domestic harvest and imports amounted to 7.1 million tonnes.
Moroccan state grains agency ONICL has yet to make its first foreign purchase under a new import campaign that started in June, however.
“Priority is, of course, given to the domestic production before resorting to imports,” the ministry said.
Unfavourable weather slashed Morocco’s cereals harvest from 8.4 million tonnes in 2011 to 5.1 million tonnes this year, of which 2.74 million was in soft wheat, 1.13 million in durum wheat and 1.2 million in barley.
Of the 2.74 million tonnes of soft wheat forecast to be produced locally this year, 1.45 million entered the formal distribution chain by mid-August, the ministry said.
Confirming a sense of urgency in the gathering of the domestic crop, the ministry said that the figure exceeded “initial estimates”.
TEMPTING THE FARMERS
Because of a predominance of subsistence farming, 53.7 percent of Morocco’s soft wheat harvest last year ended up in the formal distribution chain. The remainder is either consumed by farmers or goes to unorganized traditional milling.
“Authorities hope that extending the collection campaign will tempt farmers to sell more of their produce,” said a private importer in Casablanca.
“The end of the domestic crop is near. At the pace it has been this year, there is little use in extending the deadline,” the importer added.
He noted that between the start of the harvest in June and the end of July, farmers’ monthly sales of domestic soft wheat went from 980,000 to 350,000 tonnes.
“The ministry is already informing us that the same figure fell to 120,000 tonnes in the first half of August,” he said.
Soft wheat stocks are expected to fall from 2.35 million tonnes by end-July to 1.75 million tonnes by end-August, figures from the ministry and ONICL showed.
“This level (1.75 million tonnes) of stocks, which covers over four months of milling needs, guarantees normal supply conditions for the country in the coming months,” the ministry said.
Earlier this month, two soft wheat tenders of 300,000 tonnes each, under preferential trade agreements with the European Union and the United States, received no bids.
Local importers said high international prices, coupled with a 17 percent import duty imposed by the state and other charges, left too thin a margin, while domestic supplies could still cater for immediate milling needs.
The state will eventually have to reduce the import duty on cereals this year, industry operators say, but the government may delay that as long as possible.
“The administration hopes international prices will ease before lowering import duties,” a source at the state-run National Institute for Agricultural Research (INRA) said.
“If they do it now, the production cost of flour will rise and it’s a double-whammy for the state, since the cost of subsidizing flour will also increase,” he added.
The government has announced a sketchy plan to reform its subsidy system, the cost of which equalled its 6.9 percent budget deficit in 2011, its highest fiscal shortfall since the 1990s.
The IMF recently awarded Rabat a $6.2 billion liquidity line, which may give it the financial firepower it needs to ensure supplies of soft wheat. But the IMF deal stipulated that the budget deficit must be kept below 6 percent in 2012.