Record wheat imports forecast for Morocco…

By Peter McMeekin

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 metric tonne, including 0.7MMT of durum wheat. The wheat crop was 40.6 per cent lower than the 2023/24 harvest of 4.16MMT. It was even lower than the 2022/23 production disaster of 2.71MMT and is the smallest crop since the 1.58MMT harvest in 2007/08.

The barley story is even worse, with the government's final production number of 0.65MMT, 51.9 per cent lower than the 2023/24 output of 1.35MMT. 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 0.62MMT.

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 48 per cent 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 10MMT in 2023/24 to 10.1MMT 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 98 per cent of total wheat demand.

The FAS is calling domestic barley consumption unchanged year-on-year at 2.3MMT, 1.5MMT of which is classified as feed and residual, mostly stockfeed rations, and 0.8MMT 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 20 per cent from 6.24MMT last season to a record 7.5MMT 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 1.5MMT to 1.2MMT.

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. Omar Yacoubi, head of the Moroccan grain traders association, expects Russia to surpass France as the Mediterranean nation's leading soft wheat supplier in 2024/25. Yacoubi, believes that France lacks the necessary quality and quantity to supply the Moroccan market this year, and its 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 4.58MMT, or 73.5 per cent of the import program, much of which was shipped from France. This was down 8 per cent year-on-year, from just over 5MMT and 80.1 per cent of the task. Canada was the second biggest supplier with around 0.87MMT, 18.4 per cent 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 8 per cent of the program at just over 0.5MMT. Ukraine supplied as much as 20 per cent of Morocco’s soft wheat imports in the years prior to the Russian invasion. While it did recover some ground in 2023/24, at 0.18MMT it was still less than 3 per cent of the total milling wheat program.

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

Moroccan state-run grains agency Office National Interprofessionnel des Céréales et des Légumineuses (ONICL) pays the nation’s merchants a subsidy for each tonne of wheat they import, regardless of origin, to compensate for relatively high global prices. ONICL reportedly considers French, German, US and Argentinian wheat prices to calculate the subsidy each month. 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 0.4MMT in the first four months of its 2024/25 marketing year. This is around 80 per cent of total Russian wheat shipments to the Maghreb nation in the entire 2023/24 year. By comparison, at 0.5MMT, French shipments accounted for around 29 per cent of the four-month program. However, 60 per cent 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 1MMT 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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