Morocco record wheat import forecast

Severe drought decimated cereal production in Morocco this year with the final numbers proving even worse than the dire pre-harvest government expectations. This will increase the quantity of wheat that Moroccan millers will need to purchase in the international market over the course of its 2024/25 marketing year (June to May).

In late September, the Moroccan government released its final wheat and barley production numbers for the 2024 harvest, with poor results forcing authorities to continue to support milling wheat imports through a flat-rate subsidy to contain food prices and dampen domestic inflation.

Total wheat output was pegged at 2.47 million tonnes (Mt), including 0.7Mt of durum wheat. The wheat crop was 40.6pc lower than the 2023/24 harvest of 4.16Mt. It was even lower than the 2022/23 production disaster of 2.71Mt and is the smallest crop since the 1.58Mt harvest in 2007/08.

The barley story is even worse, with the government’s final production number of 0.65Mt, 51.9pc lower than the 2023/24 output of 1.35Mt. Like wheat, this year’s harvest result was worse than the poor 2022/23 season and is the smallest barley crop since the 2016/17 season when production was only 0.62Mt.

The problems started last autumn, with a poor soil moisture profile across much of the cropping area leading to a sharp fall in the planted area, the lowest in more than two decades. Seeding in some regions was not completed until January of this year as farmers awaited the season’s first rainfall. Much of Morocco has been in drought for a number of years, peaking in 2023, which was considered the driest ever recorded, with a mean rainfall deficit of 48pc compared to the nation’s long-term average.

In the past, Morocco has devoted as much as five million hectares to cereal crops each year, but the lack of rainfall leading up to last year’s planting window resulted in just 2.7 million hectares being planted to cereals last autumn for the 2024/25 harvest. Furthermore, sparse in-crop rainfall and poor growing conditions resulted in a very low vegetative index for almost the entire season. Only some very good and timely precipitation in the spring month of March rescued the crop and avoided a total wipeout.

According to the USDA’s Foreign Agricultural Service, domestic wheat consumption in Morocco is set to increase in line with population growth from 10Mt in 2023/24 to 10.1Mt this season. With very little wheat going into domestic stockfeed rations, the Maghreb nation’s FSI consumption (food, seed and industrial) accounts for more than 98pc of total wheat demand.

The FAS is calling domestic barley consumption unchanged year-on-year at 2.3Mt, 1.5Mt of which is classified as feed and residual, mostly stockfeed rations, and 0.8Mt is FSI demand, largely for beer, medicinal syrups, energy drinks, vinegar, and baby foods.

The poor harvest is likely to see this season’s wheat imports increase by more than 20pc from 6.24Mt last season to a record 7.5Mt in 2024/25. On the other hand, after an extremely tight carry-in necessitated a big year for imports in 2023/24, international barley purchases in 2024/25 are expected to drop from 1.5Mt to 1.2Mt.

While the EU has traditionally been Morocco’s biggest supplier of wheat, the tide is turning toward the Black Sea region to meet the rising import demand. Morocco National Federation of Grain and Pulses Traders (FNCL) head Omar Yacoubi expected Russia to surpass France as the leading soft wheat supplier to Morocco in 2024/25, believing that France lacks the necessary quality and quantity to supply the Moroccan market this year. Buyers must turn to other exporters such as Russia, Ukraine, Romania and Bulgaria out of the Black Sea, with Poland and the Baltic States also likely to increase volumes.

In 2023/24, the EU-27 supplied around 4.58Mt, or 73.5pc of the import program, much of which was shipped from France. This was down 8pc year-on-year, from just over 5Mt and 80.1pc of the task. Canada was the second biggest supplier with around 0.87Mt, 18.4pc lower than in 2022/23.

After an enforced two-year hiatus, imports from Russia resumed in 2023/24 to become the third largest supplier, accounting for around 8pc of the program at just over 0.5Mt. Ukraine supplied up to 20pc of Morocco’s soft wheat imports in the years prior to the Russian invasion. While it did recover some ground in 2023/24, at 0.18Mt it was still less than 3pc of the total milling wheat program.

The two main barley suppliers in 2023/24 were the EU-27 with 1.22Mt and Russia with 0.27Mt, collectively accounting for 97.3pc of the shipments. Member states of the EU-27 were the sole suppliers in the 2022/23 marketing year with a meagre 0.35Mt barley imports.

Moroccan state-run grains agency Office National Interprofessionnel des Céréales et des Légumineuses (ONICL) pays merchants a subsidy for each tonne of wheat imported, regardless of origin, to compensate for relatively high global prices. ONICL reportedly bases the subsidy calculation each month on French, German, US and Argentinian wheat prices. This means that the rebate has a strong correlation with Matif wheat futures but bears very little semblance to Black Sea values.

When Matif futures rise, Moroccan importers can expect a higher rebate for wheat imports in the subsequent month. If physical prices remain stable or fall at the origin, it is doubly attractive for domestic consumers to purchase that wheat for arrival in the following calendar month. This creates a distinct advantage for export origins where physical prices are not tied to Matif futures, such as the Black Sea, Russia and Ukraine in particular.

Analysis of early season trade data reveals that Russia supplied almost 0.4Mt in the first four months of its 2024/25 marketing year. This is around 80pc of total Russian wheat shipments to Morocco in the entire 2023/24 year. By comparison, at 0.5Mt, French shipments accounted for around 29pc of the four-month program. However, 60pc of this was in June, with the Baltic States completely pushing France out of the equation in September.

The rebate system is likely to be one of the reasons for the flurry of buying activity over the past six weeks for November delivery. While Russian milling wheat appears to have lost competitiveness relative to French origin with the recent slide in Matif futures, Moroccan importers reportedly have as much as 1Mt of milling wheat on their books for November delivery alone, around half of which appears to be Russian, and only a quarter French.

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Tags: wheat, drought, imports, output, Market, Morocco, cereal, harvest, Production