Morocco Agribusiness Report Q3 2009

As is often the case in Africa, agriculture is the largest employment sector in Morocco, accounting for 40% of the working population. However, the sector contributes significantly less to overall GDP earnings than this figure would suggest, and is characterised by small-scale husbandry. Despite being self-sufficient in many farmed goods, the country is nevertheless a regular importer of some foodstuffs; a dynamic that has increased in recent years as drought has ravaged much of the region, severely hampering production. To stem the rising tide of consumption staples being sourced from overseas, the government has sought to improve the performance of domestic agriculture. However, ever-tightening water supplies and rapid urbanisation threaten to undermine such efforts. It is against this backdrop and with the global recession yet to abate that Morocco Agribusiness Report Q309 is published.

Owing to its proximity to Mediterranean Europe in the North and the drier climate associated with the Western Sahara in the South, Morocco's agriculture sector lends itself well to the cultivation and harvesting of a diverse range of goods. Various domestically produced vegetables, pulses and fruits are sufficient to cater to local demand, while in some cases production is robust enough to allow export to mainland Europe. Yet droughts, which are an historical regularity in the country, have lingered in the region during recent harvests, meaning that more imports have been required when, paradoxically, the price of agricultural goods on world markets have been higher than ever. As such, there is a need to improve the outlook of domestic Moroccan production.

The government, realising the precarious position of Morocco as a net food importer, has initiated a 10- year plan - estimated to cost US$20.67bn - to upgrade and diversify Moroccan farming, help the sector to fight poverty and boost export growth. Irrigation is an area where much investment is likely to be directed, so as to more efficiently use the water resources of a country where there is, on average, a drought every three years. Large sums of money have been used in establishing agricultural research centres where future innovations can enhance the potential of local farming.

Along with improved weather fundamentals, we believe that state efforts to improve the domestic outlook will enable double-digit supply and demand growth to be realised across virtually the entire range of agricultural goods covered in the report’s outlook in 2009 and beyond. Grain farmers in particular will benefit massively from the rains, while the adoption of relevant seed types and modern farming techniques are likely to complement the outlook.

In addition to the goods covered in our outlook, opportunities abound for agribusiness processors given the diversity of goods that are produced at the farm level. The dairy industry will continue to expand at a good pace, although falling cheese consumption will mean that exports will need to make up a larger percentage of the destination of local production. Conversely, and in a dynamic that stands in contrast to that being witnessed in most other countries, butter consumption is likely to outweigh production, so that the deficit grows by roughly 47% between 2009 and 2013.

We expect greater productivity in Moroccan agriculture to be characterised by the emergence of a more streamlined and highly consolidated industry. This will come at the detriment of small farmers, who can often be heard complaining that the majority of the gains made, thus the bulk of extra profits, are by the more commercially minded units, which can than use their enhanced financial positions to consolidate the market. Having said this, if food security and GDP growth are in the best interests of the population as a whole, then this shift in industry fundamentals is needed; this does not have to result in higher levels of unemployment if larger enterprises can integrate and synergise their efforts to more closely accommodate those of smaller farms.