Saturday, November 23

Cash-tight Morocco bides time on massive wheat buys

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* Short of cash, Morocco bids to cool wheat markets
* State has not tapped int’l wheat markets in import campaign
* Morocco faces biggest wheat imports in 3 decades (Adds details and background)

By Souhail Karam

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RABAT, Aug 16 (Reuters) – The Moroccan government, facing its biggest wheat import requirement in three decades even as hard currency reserves dwindle, said it would not tap international soft wheat markets before the bulk of its domestic harvest is sold.

The announcement, from the agriculture ministry, comes a few days after the north African country’s state-run grains agency ONICL received no bids in two tenders this week for 600,000 tonnes of European Union and U.S.-origin soft wheat.

A massive shortage in the domestic cereal harvest comes at a sensitive time for the $92-billion economy, struggling to recover after its balance of payments clocked its biggest deficit last year in nearly 30 years.

With a little under half the domestic soft wheat harvest remaining to be collected, the ministry said the lack of interest in the two tenders, both of which fall under free-trade agreements with the EU and the United States, was due to the lower prices offered for the domestic wheat crop.

Because of a predominance of subsistence farming, around half of Morocco’s soft wheat harvest usually ends up in the distribution chain while the other half is consumed by growers. For durum wheat, the whole production is consumed by growers.

“(Cereal) Imports under free-trade agreements represent only a fraction of overall (cereal) imports,” the ministry said.

The statement followed alarming reports this week by the local press about the availability of wheat flour after the last two tenders proved inconclusive.

“The Government will continue to monitor the collection, changes in (domestic) wheat stocks as well as the fundamentals of the global market and will again resort to imports after most of the national harvest is commercialized,” it added.

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 tonnes was in soft wheat, 1.13 million tonnes in durum wheat and 1.2 million tonnes was in barley.

Those numbers meant that the country of 34 million should make by end-May, 2013 its biggest cereal imports in three decades. Private grain traders group ANCL estimates soft wheat import needs at 4 million tonnes before the end of May, 2013.

But through ONICL, Morocco has yet to complete its first wheat purchase since the new import campaign started in June while an import duty of 17 percent coupled with a rise in prices is turning private importers off international markets.

The ministry said soft wheat stocks by the end of August should stand at 1.75 million tonnes, enough to cover four months of milling needs.

ONICL’s data shows soft wheat stood at 2 million tonnes by end-June, boosted mainly by the addition during that month of 980,000 tonnes of soft wheat from the domestic harvest while private imports of the commodity stood at only 20,000 tonnes.

Morocco processes for consumption between 400,000-500,000 tonnes of soft wheat per month.

Since the start of June and until the end of the first week of August, farmers had sold 1.39 million tonnes of the 2.74 million tonnes of soft wheat expected to be harvested this year, the ministry added on Thursday.

Two private Casablanca-based industry operators said the statement indicated just how “exceptionally-fast the collection of domestic soft wheat has been this year”.

“The statement is in line with policy recently advocated by Prime Minister Abdelilah Benkirane about slowing down imports in general amid the economic crisis hitting Morocco,” a Casablanca-based trader said.

It would not be possible to rely exclusively on domestic wheat to ensure adequate supplies and Rabat will eventually have to freeze import duties on soft wheat currently at 17 percent, a miller and importer said. Morocco usually imposes a 100-plus import duty regime on soft wheat imports in years of good domestic harvest.

“Domestic soft wheat this year is of better milling quality compared to last year but you still need to cut it for up to 50 percent with better-quality foreign wheat to have a decent bakeable mix,” the importer said.

The timing of the shortfall coupled with a recent surge in global grain prices could not have been worse for a country heavily-anchored to the beleaguered economies of the euro zone, which means that the Moroccan trade deficit is rising and eating rapidly into its foreign currency reserves.

Rabat was forced earlier this month to seek IMF help in part to keep its foreign currency reserves above levels that would permit it to cover import needs for at least four months.

In a note issued on Thursday, the finance ministry said Morocco’s soft wheat imports stood at 2.9 million tonnes in the previous import campaign which coincided with a domestic harvest of 4.17 million tonnes, which means a total domestic consumption of 7.1 million tonnes.

($1 = 8.9329 Moroccan dirhams) (Reporting By Souhail Karam; editing by Keiron Henderson)

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