2013-03-21 13:37:47 - New Food market report from Business Monitor International: "Morocco Agribusiness Report Q2 2013"

BMI View: Morocco's agriculture sector holds promising potential, especially the dairy, poultry and sugar industries. 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 the sectors to develop. However, the lack of investment in modern infrastructure will hamper production growth in the short term. Moreover, the heat wave that has affected Morocco in recent months has damaged the outlook for 2012/13 agricultural output. As a result, food price inflation is likely to accelerate in the coming months, even more so with the modification of the food

and energy subsidy programme in 2013.

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 country's 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 milkproducing 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.
* BMI universe agribusiness market value: 16.7% year-on-year drop to US$4.2bn in 2013, forecast to grow on average 5.7% annually between 2012 and 2017.
* 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 1.3% in 2012. We forecast inflation to average 2.3% between 2012 and 2017.


Full Report Details at
- www.fastmr.com/prod/552346_morocco_agribusiness_report_q2_2013.a ..


Key Developments

Food consumer price inflation (CPI), which has been on the rise since August 2012 while non-food price inflation has remained moderated, is likely to continue to accelerate in coming months. Food accounts for 45% of the consumer price basket and has historically been the primary driver of price volatility in the economy. In the short term, food CPI will be pushed by elevated grain prices, which we expect will remain high at least until the northern hemisphere's harvest from June 2012. In the medium-term, food price inflation is likely to remain under pressure due to the upcoming modification of Morocco's food and energy subsidy programme.

Morocco's recent decision to delay its 2008 plan to cap sugar import needs at 45% its annual demand by end-2013 is a sign that 2012/13 production levels will be disappointing. The government now plans to draft a new development plan for the sugar industry that aims to have 53% of domestic sugar demand produced locally by 2020. We already believed the recently abandoned goal was too ambitious, as production usually only account for 35% of annual demand. With our rather optimistic output growth rate of 4.0% annually between 2012/13 and 2016/17, imports would still make up for well over half of consumption at the end of the period.

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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