Better Moroccan wheat harvest not enough to offset price increase

12/05/2008

Thanks to government initiatives and improved water conservation, Morocco anticipates doubling last year's grain harvest. Some vendors worry, however, that speculation in the wheat market will continue to drive up domestic prices.

By Imane Belhaj for Magharebia in Casablanca – 12/05/08

[Getty Images] A farmer spreads fertilizer on a wheat field outside Rabat. Although Morocco anticipates a better harvest than last year, many worry that prices will continue to rise.

Morocco expects to produce 5 million tons of grains this year, but that may not be enough to keep prices from rising.

Figures released last month by the Moroccan Ministry of Agriculture show that while this year's anticipated grain harvest is more than double the 2007 total, it is still less than the 5.15 million ton average of the past ten years. The sector had predicted a 5-6 million ton harvest.

The Ministry report noted that climate conditions for the current agricultural season, together with the efforts by farmers and the government, have generated satisfactory overall results for crops as well as cattle. Rainfall shortages in some regions, however, resulted in both lower grain harvests and poor grazing conditions for livestock.

Ibrahim Hasnaoui, head of the General Union for Agriculture, expected a relatively mediocre harvest of 42 to 43 million quintals, given the impact of weather conditions on land sustained by rainfall, not irrigation.

"If self-sufficiency requires 60 million quintals, that means Morocco has to import 40 percent of its grain needs, i.e. 22 million quintals," Hasnaoui told Magharebia.

Predicted productivity varies from one region to another, he explained. In rain-watered areas, the production rate is 5 to 6 quintals per hectare. In irrigated regions the rate jumps to 60 quintals per hectare.

As the main domestic buyer, the government sets the benchmark price for soft wheat. To assist farmers, the Agriculture Ministry announced on April 17th that it would increase the price by 20% for the June-August 2008 crop season.

But the new 300 dirham reference price is still inadequate, Hasnaoui said, since broker speculation is expected to push up prices to as much as 600 dirhams for whole wheat.

Retail wheat vendors also worry about what speculators could do to the market. Abdullah, like many vendors, worries that they will buy at a price slightly higher than the 300 dirhams set by the government so as to later monopolise the market.

"The expected harvest is medium-sized, therefore, there are growing concerns regarding the ceiling prices will reach over the coming few months." Given the fluctuations in the global wheat market, however, he feels that speculators are inevitable.

According to another grain merchant, the consumer always ends up paying the price. Mustafa is a grain vendor in the Casablanca market, where a quintal of whole wheat has reached 700 dirhams. "Brokers are speculating on prices, expecting them to soar," he says, "[but the state does not possess mechanisms to control prices, especially in free markets".

Meanwhile, Morocco has instituted procedures to ensure that the current agricultural season passes by smoothly, including an import tariff exemption on seeds.

On April 24th, 2008, the Ministry of Agriculture launched the "Green Morocco" plan to develop the agricultural sector and enhance its contribution in the Gross Domestic Product (GDP) by 100 billion dirhams. Over ten years, the government hopes to improve the food supply, boost Moroccan agricultural exports and economise water use. Agriculture operations currently generate 16% of GDP but consume 80% of the country's fresh water resources.

Under the "Green Morocco" initiative, 1.4 billion dollars will be invested annually in 1,500 new agricultural projects to improve olive oil, vegetables, fruits and grains in the Moroccan countryside. Free trade agreements with the US and the EU should help increase food exports.