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Morocco Agribusiness Report Q1 2013

Morocco agribusiness market: New market research published

The heat wave that has affected Morocco in recent months has damaged the outlook for 2012/13 agricultural output. Grain production is forecast to drop, forcing the country to import significant amounts of grains in the short term. This will very likely keep food price inflation high and GDP growth lower. The dairy sector is benefiting from growing interest from international dairy companies and is likely to enjoy strong growth in the coming years. In the livestock industry, we expect increased government support and investment - backed by strong domestic demand - to help these sectors to develop.

Key Forecasts

- Wheat production growth to 2016/17: 39.2% to 8.4mn tonnes. This will come on the back of steady growth in the countrys wheat demand, a result of strong economic growth. Increased planting and productivity gains will also help to support output.

- Milk consumption growth to 2016/17: 22.4% to 561,700 tonnes. The ubiquity of domestic milk-producing animals means that household consumption of fresh milk is easily facilitated and virtually recession-proof.

- Poultry production growth to 2016/17: 25.1% to 851,900 tonnes. The sector is likely to continue to benefit from ongoing investment in the modernisation and expansion of broiler production, in addition to strong domestic demand.

- Real GDP growth 2013: 3.5%, down from 2.5% in 2012. Over the longer term, we forecast GDP growth to average 4.0% between 2012 and 2017.

- Consumer price inflation 2013: 2.0% average, up from 1.5% in 2012. We forecast inflation to average 1.5% between 2012 and 2017.

- Our universe agribusiness market value: 15.8% year-on-year (y-o-y) drop to US$4.3bn in 2013, forecast to grow on average 4.1% annually between 2012 and 2017.

Key Developments

We have revised down our forecast for wheat production in Morocco due to delayed plantings and droughts resulting in the destruction of wheat fields. We maintain our view for the country to import significantly more wheat in the coming months because of a historically low production balance and insufficient stocks. Higher imports are likely to push up food prices while dragging on domestic consumption and balance of payments dynamics. Even though we see temporary tightness in the wheat markets because of adverse weather conditions in the EU, the Black Sea region and the US, we believe Morocco will be able to supply its production deficit in the coming months, especially as the harvest in the northern hemisphere started in July.

Major dairy companies are investing in Moroccos dairy sector in order to strengthen milk production in the North Africa region and benefit from strong consumption growth in the coming years. The country is often used as a base to export to the wider region, including Algeria, Tunisia and Egypt. French food group Danone announced in June 2012 it paid EUR550mn (US$685mn) to take control of Moroccos top dairy product company, Centrale Laitière. Nestlé is set to invest US$5.7mn in Morocco to strengthen milk production in the region.

Domestic feed supply is likely to be tight in the coming months, as droughts in various growing regions destroyed wheat fields and delayed plantings, leading to a steep drop in expected final production for 2012/13. As a result, Morocco will need to import more feed grains, which will make the livestock industry vulnerable to the international grain prices rally that started in June 2012. Small-scale livestock farmers also suffered from the heat wave that struck Morocco in August 2012. However, poultry prices are likely to inflate in the coming month, encouraging producers to boost output in 2012/13.

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