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Morocco: Agriculture Opportunity

Conclusion: Location: Atlantic Coast (with proximity to Tangier port) Produce: Citrus Fruit, Tomatoes, Olives and Grapes Positives: Strong Government support Concerns: Regulatory environment, EU Sanctions, Labor conditions

Morocco Geographic Overview

Most favorable region
Mediterranean Sea

Atlan(c Ocean

Algeria

In rainfall regions of the northeast (Nov-Apr), barley, wheat and other cereals can be produced without irrigation. On the Atlantic coast, where there are extensive plains, olives, citrus fruits and wine grapes are grown, largely with water supplied by artesian wells
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Favorable Regions for Farming

The impact of climate change on agricultural yields constitutes the second step of the "World Bank - Kingdom of Morocco: Adaptation to climate change in the agriculture sector". It builds on climate change scenario data developed by Wilby (2008) and provides one the bases upon which "Impacts on Farming Systems" and "Economic impact assessments", will be based, leading eventually to "Policy adaptation options".
Figure 1.01: Major agro-ecological zones of Morocco. FAV: Favorable, INT: Intermdiaire; DEF-or: Dfavorable oriental; DEF-sud: Dfavorable sud; MONT: Montagne and SAH: Saharien.

Favo

rable

Mo u

ntain

Unfavorable Eastern

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This is a purely descriptive study in that it does not present any recommendations, apart from methodological ones. Instead, it attempts to describe in synthetic terms the large diversity of

Investment Themes
Significant Opportunity to invest in agriculture in Morocco
Investment in agriculture is characterized by insufficient use of production factors e.g. 4x less fertilizer use per hectare compared to France and 11x less mechanization compared to Spain Inadequate participation of the banking system only 18% agriculturists benefit from the allocation of loans Poorly developed agro-industrial infrastructure

Advantageous geographical location: proximity to the European market The agriculture sector is poorly organized and is weakened by the traditional system of management of farms resulting in demand for more professionally managed farms Inefficient irrigation systems: opportunity to run farms in a more efficient manner Excessive parceling of property is a major constraint in the development of agriculture 70% farms are smaller than 5 hectares In addition to the export market, domestic market can constitute significant opportunities due to population growth and improvement in the quality of life Improved citrus export logistics with the opening in 2011 of a new shipping line between the port of Agadir and the port of St. Petersburg in Russia, the leading export destination market. In addition, a new shipping line between the port of Tangier and port of Jabel-Ali in the UAE became operational in early 2012. This shipping line should help increase the competitive position of Moroccos citrus exports in the Arab Gulf States markets
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Morocco Green Plan

Make agriculture a lever for growth during the next 10-15 years
Increase the agriculture contribution to 174 billion MDH by 2020 Increase amount of exports Invest 10 billion MDH (~$1.2 billion) annually

Encourage aggregation amongst small farms Ensure growth through 2 strategies:

Pillar I Development of high value-added/high productivity agriculture. Focuses on projects that generally depend on private financing and produce milk, red and white meat, cereals in favorable non-irrigated zone. Farms are located in high potential agriculture zones Pillar II Upgrading of the small farmer fabrics. Focuses on development of smaller farms and is based on experiments undertaken in other countries. The objective is to improve farmers revenues by improving production in unfavorable zones

Promote private investment Ensure government participation Sustainable Moroccan agriculture: conversion of nearly 1 million hectares of cereal crops to fruit tree plantations to protect agricultural spaces Set-up framework for public-private partnerships

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Regulatory Environment
The Government is supportive of encouraging agriculture growth in the region and has launched various programs like Green Morocco Plan, Fruit tree productivity project Treaties with EU region and Algeria to boost exports through increase in customs quota increase, enlargement of the list of products that can be exported Morocco has the provision of most favored nation in case of granting a benefit to a third world country Since Moroccan exports primarily concentrate on the European market, production is mainly determined by the legal and private requirements of EU buyers
Application of tariffs on Moroccan product to protect EU producers like Spain & Portugal Export schedule designed to limit telescoping periods of EU production Entry price fixed for most products Use of certain fertilizers prohibited

Morocco's subsidy system began heading towards crisis in early 2011, when the government started sharply raising its spending on subsidies to buy social peace as uprisings engulfed other countries in the region. This turned out expensive and has resulted in high government debt and interest rates (4%+) Government reforms are now needed to prevent heavy government borrowing from destabilizing the economy. As a result, the Governments 20% hike in subsidized petrol prices has resulted in increasing the harvest and transportation costs of the produce. This coupled with a cold winter has pushed the prices of vegetables and fruits higher
High production costs could render the output uncompetitive in the export markets

Further, as the Govt works on easing subsidies (could happen as early as June) there is a significant risk of inflation going up (current rate 2%). This could result in increase in output prices and could affect exports
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Appendix

Agriculture in Morocco
Morocco farming contributes about 19% of the GDP and is characterized by small farms More than 40% of arable land is used for cereal crops. 7% is devoted to plantation crops like almonds, olives, grapes, dates and citrus. 3% of the land is employed for pulse cultivation. Agriculture in Morocco also involves harvesting of industrial crops like sugarcane, cotton and sugar beets More than 40% of farmable area is currently unfarmed Only 1 million hectares of a total of 8.7 million hectares of cultivated land are irrigated. About 90% of the land, mostly comprised of small land holdings, is dependent on rainwater. A small fraction of the cultivated land is comprised of modern export-oriented farms that produce 80% of Morocco's citrus and wine production, 33% of its vegetable output, and 15% of its cereals production. The irrigated farms, concentrated in the Gharb plain around Fez and Meknes, the Doukkala plain around Casablanca, and the Beni Mellal and Berkane areas, also produce tomatoes, potatoes, and beet and cane sugar, as well as oil and olive oil for export. Fruit and Vegetable production:
The major export crops of the Kingdom of Morocco are vegetables and citrus fruits. Other export crops are barley, wheat, sugar beets, tomatoes, sugarcane, olives, oranges, potatoes, peanuts, sunflower and garbanzos. More than 17 varieties of citrus fruits are grown in different parts of the country, although oranges and clementine dominate exports Tomatoes constitute the majority of exports under the vegetable category. Other vegetables grown include green peppers, water melons, cucumbers, zucchini and aubergines Other fruits produced in significant quantities include grapes, dates and olives

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Citrus Fruit Production in Morocco

Morocco is the 4th largest fresh citrus exporting country in the world and the 2nd largest exporter of clementine European Union markets are the main destination of Moroccan export. However, in the last few years, there was a significant diversification towards Russia and Canada
Export split: EU (52%), Eastern European countries (36%), Canada & U.S. (9%) and Others (3%)

Moroccos citrus exports are mostly dominated by small citrus and oranges. About 80% of exports consist of Clementine, Maroc Late, Nour and orange varieties The Souss region (Agadir and Taroudent) accounts for nearly half of Moroccos citrus production, and about 80% of its total citrus exports. This region continues to face critical water shortages which impede plans for future expansion of the citrus areas Water scarcity in the Souss-Massa region and the appeal of exports encouraged many leading citrus producers to consider the Gharb area as an alternative region to expand citrus production The Gharb region in the northern part of Morocco (Kenitra and Sidi Kacem) appears to have high potential for production growth. The expansion of citrus production in the Gharb area, however, has been constrained by aging orchards, limited number of citrus varieties, and the lack of new investment. Issues: Sanitary conditions (gummosis and virus diseases), aging (over 55% of plantations are more than 30 years old and 8 to 10% have over 40 years of age) and drought conditions in different producing areas during the last decade have affected produce

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Tomato Production in Morocco

Tomatoes are the second most important horticultural export product of the country. Nearly 90% of the tomatoes produced are exported The Moroccan tomato sector has a dual structure. Production for the domestic and export markets is usually separated. While tomatoes for the export market are always produced in technically highly advanced production systems in plastic greenhouses, tomatoes for the national market mainly stem from open field production While open-field production for the domestic market takes place all over the country, the production of greenhouse tomatoes is mainly located in a regional cluster in the south Atlantic coastal strip in the region of Souss Massa. About 74% of total production originates there Around 30% of tomato producers are small-scale farmers who cultivate less than 5 ha. Their production area represents only about 10-15% of the total production area for early tomatoes. The majority of the producers cultivate an area between 5-20 ha. Farms belonging to this group cultivate around 50% of the total tomato area. Only 10-15% of the farms are larger than 20 ha, but they represent around 40% of the early tomato area Issues: exporters work in aggregating much of the quota within a small group of producers. The already very limited number of non-integrated producers products for the export market will disappear within few years. However, this trend could of course change if the EU were ready to abandon its entry price system.

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Grape Production in Morocco

Table grapes are a key crop for export from Morocco to Northern Europe, United States and China Viniculture in Morocco spans over an area of 49,000 hectares of vineyards yielding an annual production of 310,000 tonnes of grapes, including 172,000 tonnes of table grapes. Ranks 30th worldwide 71% of the area dedicated to the production of table grapes is in the regions of Doukala, Al Haouz, Benslimane, Rabat-Sal, Khemisset and Essaouira, while the wine grape vineyards are to be found in the regions of El Hajeb, Khemisset, Meknes, Gharb and Melouis Viticulture under the green Morocco plan target to boost agricultural production. Vineyards to generate not less than 196 million dirhams annually
A budget of almost 150 million dirhams will be allocated for the wine industry as part of the Green Morocco Plan The Benslimane region to be the first to benefit from the budget allocation with the implementation of several development projects in the regions wine sector. Benslimane has more than 3,700 hectares dedicated to the cultivation of grapes, or 7% of the total of land used for grape production in Morocco

Wine: Morocco ranks far below the top three wine-producing countries (Spain, France and Italy) and produces about 10.5 million gallons annually. Additionally, Morocco being a Muslim dominated society (alcohol consumption is prohibited in Muslims), domestic demand could be limited Issues: Heavily regulated. Additionally, loss of land used for viticulture sees a steady decline in the area planted with vines. E.g. vineyards in Benslimane have shrunk drastically in recent years, from 3,846 hectares in 2002 to 2,510 hectares in 2011, a decrease of 8.7%

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Olive Production in Morocco

Morocco is the worlds second largest producer of table olives and 6th largest olive oil producer. Currently Morocco produces 60,000 tons of table olives and 17,000 tons of olive oil every year Olive oil production has been increasing globally at about 4% per annum during the last decade Under the EU treaty the quota of 52,000 tonnes of oil has been abolished and Morocco can now freely export its entire production
Spain is the world leader of olive oil producer at 1.6 million tonnes compared to Moroccos about 135,000 tonnes

Production regions: Marrakech, Casablanca, Meknes and Fez. Marrakech specializes in table olives, while Meknes and Fez produce more olive oil. Morocco is planning to plant additional 700,000 hectares of olive trees expecting that in few years oil produced by the new plantation will be in direct competition with Andalusia production. Also labor conditions are very different - in Morocco, an employee's salary is 6-8 euros ($8 to $10) a day for eight-nine hours' work. But in Spain the cost is 60 euros a day for six hours of work Issues: falling prices of Spanish olive oil coupled with high unemployment rates in Andalusia could result in EU sanctions wrt to quota, putting pressure on Moroccan exports to EU. However, this risk is mitigated to the extent Morocco looks for new markets. It is already exporting to China and U.S.

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Wheat & Barley in Morocco

Wheat planted area is estimated at 3.17 million HA 2.18 million HA of soft wheat and ~1.0 million HA of durum wheat, while barley area is estimated at 1.78 million HA Moroccos per capita consumption of wheat, estimated at 258 kg annually, is among the highest in the world. Additionally, Morocco is one of the worlds major wheat importers 2011-12 production fell to 4 MT (compared to 6.3 MT in the previous year) due to rain delays and severe winter 40% of 2011-12 consumption came from imports (mainly from France, US share was 8%) Barley is consumed mostly as animal feed in Morocco, with total consumption estimated at 3 million tons p.a Due to poor pasture conditions, livestock producers increased demand for barley. Barley prices in some local markets soared to an unprecedented level of 5,000 MDH (about $600) per MT Common (soft) wheat is a politically and socially sensitive commodity in Morocco. The government devised a mechanism by which bread wheat prices have been successfully maintained at low levels and the government treasury has supported the difference in the costs. The Moroccan Government continues to subsidize more than one million MT of soft wheat flour (3,500 MDH/MT). The distribution of flour is subject to heavy government control. However, the Government is not involved in the marketing and pricing of Durum wheat Government has been supporting cereal production by providing certified planting seeds to farmers at 40-60% subsidy of their actual costs Issues: In 2011, a significant part of the wheat crop suffered deterioration in quality due to widespread kernel germination as a result of excessive grain moisture content during harvest. Much of the sub-quality wheat harvest, reportedly 10-15% was unfit for human consumption. Further, the heavily subsidized wheat would make it difficult to grow wheat for imports or to increase prices
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