Dominated by traditional family operations, Moroccan farm size averages fewer than 5 hectares. More than 50% of all arable land is devoted to wheat and barley, and about 75% of these farms contain fewer than 13 ha.

Because agriculture plays a major role in the economy, the government has pursued a policy of expanding land under irrigation by building dams. In 1997, the government reached its goal of irrigating 1 million ha by 2000 when the country's largest dam became operational.

These advances primarily have benefited citrus and vegetable crops, which make up the bulk of Morocco's agricultural exports. About 90% of the area planted to wheat and barley remains dependent solely on rainfall.

During the past decade, the government has pursued an economic liberalization and privatization program, with nearly half of the 114 state companies privatized as of 1997. As part of the reform program, the government in May 1996 adopted laws allowing the private sector to import wheat, barley and other grains directly.

Even so, the government continues to provide various supports and subsidies for staple commodities, including wheat and flour, to avoid the potential for social unrest. The government retains the authority to manage stocks, assesses import duties on grain and continues to import grain for its programs. As of February 1999, the government accounted for 30% of wheat and 20% of barley imports for the 1998-99 marketing year.

The liberalization of grain imports has resulted in changes in the wheat trading and processing industries. The legislation enabling direct imports called for millers to organize into seven regional associations, which come under the auspices of the Federation Nationale de la Minoterie, or national millers' association. Some flour millers located in port cities have formed groups to import wheat directly, some companies that imported under the old government-controlled system have ceased operations, and others invested heavily in storage.

The liberalization also has resulted in a change in the sources of imported wheat. From 1990 through 1996, U.S. wheat accounted for an annual average of 33.5% of total wheat imported, but in the three years since the private sector began importing, the U.S. share has dropped to an annual average of 6%.

Meanwhile, the share of E.U. wheat imported, particularly French wheat, has increased. From June 1998 through mid-February 1999, French wheat accounted for 50.2% of total imports of 1.584 million tonnes, including 41% of the wheat imported by the private sector. Wheat from Turkey in that period made up 14% of private sector imports, while the U.S. share was 4%.

WHEAT AND FLOUR MILLING. Prices for most crops are determined freely by the market, but the government offers minimum price guarantees for farmers growing wheat, barley, durum, cane and beet sugar, sunflowerseed and rice. The minimum wheat price for 1999-00 is 2,500 dirhams per tonne, or about U.S.$253 at recent exchange rates.

Farmers may sell to the private sector at market prices, or they may sell at the minimum price to agents licensed by the government. In the case of wheat, government agents consist of cooperatives, private traders and flour mills licensed by the government Office National Interprofessionnel des Cereales et des Legumineuses (ONICL).

Wheat makes up the majority of grain purchased through government channels, although the amount varies from year to year depending on market prices and crop size. In 1998-99, slightly more than 1 million tonnes of the 4.3 million wheat crop moved through the government purchasing program, while the previous year official purchases totaled 400,000 out of 2.3 million.

ONICL continues to subsidize the production of up to 1 million tonnes annually of 80% extraction flour, known as "Farine Nationale," to assure needed supplies for low-income consumers. Prices and margins are controlled at all levels.

Under the 1998-99 subsidy program, private mills paid 2,588 dirhams a tonne (about U.S.$274) for wheat. The ex-mill flour price was fixed at 1,820 dirhams (U.S.$192), with ONICL paying the difference to the mills. Consumer prices were established at 2,000 dirhams per tonne (U.S.$211). Transportation costs of both wheat and flour for this market also are subsidized.

Non-subsidized flour, or "farine de luxe," is produced at lower extraction rates and is used for high quality bread and pastries. Prices for this type of flour are determined by the market, with an average price in 1998-99 of about 3,540 dirhams, or U.S.$374 a tonne.

Farine Nationale accounts for as much as 50% of Morocco's annual flour output. In 1996, total Moroccan flour production was 2 million tonnes, including 950,000 tonnes of subsidized flour, from a total wheat grind of about 2.65 million tonnes.

Morocco has about 80 large industrial mills with a capacity of about 3 million tonnes of wheat. Most are concentrated in urban areas such as Casablanca, Rabat and Fes. In addition, thousands of smaller mills serve individual families who grow small quantities of wheat, and about 50 mills grind barley flour and semolina for couscous.

FEED AND POULTRY. The manufactured feed industry in Morocco primarily is devoted to poultry feeding. In drought years, however, ruminant feed output increases because of the government "Safeguard of Livestock Program," which supplies subsidized feed to farmers in hard hit areas.

Industrial feed output in 1996 and 1997 was estimated by the Feed Manufacturer's Association at 801,000 and 730,000 tonnes, respectively. Of those totals, broiler and egg operations accounted for 90% in 1996 and 97% in 1997.

In addition, farmers produce about 180,000 tonnes annually of mixed feed on farm to avoid paying the value-added tax assessed on mixed feed. Feed ingredients are not subject to a VAT.

Poultry production is dominated by small, part-time operators. Although some large modern operations exist, the industry is not standardized. In most regions, birds are sold live at local markets.

Indications suggest a modern, vertically integrated industry may slowly develop. In August, the country's first integrated turkey production and processing plant was scheduled to open with 35,000 birds.

In addition to a disorganized user base, the industrial feed manufacturing sector faces high duties on imported ingredients such as maize and soybean meal. Feed manufacturers in 1997 were able to convince the Ministry of Agriculture to reduce duties on imported maize only after signing a protocol with producers to buy the domestic maize crop (375,000 tonnes) at a price of U.S.$242 a tonne.

TRADE. Although the Moroccan government liberalized grain imports by permitting private sector participation, the government still retains some control over private trade activity.

In 1997, the government required grain importers to declare their imports 21 days before the date of customs declaration in order to receive customs clearance. That action was accompanied by a provision requiring importers to post performance bonds at the time of declaration for wheat, maize, barley and pulses imports.

Under the provision, wheat import bonds were set at 100,000 dirhams per tonne, with other grains set at 50,000 dirhams per tonne. After the grain is imported, the government returns the bond within 15 days or, if the importer fails to perform, the government keeps the bond money.

The intention was to allow the government time to foresee any grain shortages. The actions also limited the participation of smaller importers who had difficulty posting the bonds.

Other trade policies affecting imports involved a new tariff system applied in October 1998. Under this system, cheaper grains are taxed at a much higher level than under the previous system. The intent was to prevent cheap imports from driving down domestic grain prices and to protect domestic markets from fluctuations in world prices.

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