VZCZCXRO1407
RR RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHRB #0627/01 1011406
ZNR UUUUU ZZH
R 111406Z APR 07
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC 6291
INFO RUEHCL/AMCONSUL CASABLANCA 2895
RUEHRC/USDA FAS WASHDC 1028
RUEHEE/ARAB LEAGUE COLLECTIVE
RUEHLO/AMEMBASSY LONDON 3271
RUEHFR/AMEMBASSY PARIS 4593
RUEHNK/AMEMBASSY NOUAKCHOTT 3464

UNCLAS SECTION 01 OF 02 RABAT 000627 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR NEA/MAG, EB/IFD/OIA and EB/TPP/BTA 
STATE PLEASE PASS TO USTR DOUG BELL AND MARY LATIMER 
USDA FOR KATHY MCKINNELL AND AILEEN MANNIX 
 
E.O. 12958: N/A 
TAGS: ECON EAGR ETRD MO
SUBJECT: MOROCCO DROUGHT FORETELLS ECONOMIC CONTRACTION 
 
REF: RABAT 00423 
 
Sensitive but unclassified.  Please protect accordingly. 
 
¶1. (U) Summary:  Late and insufficient rain has severely reduced the 
expected cereal harvest this year and endangered livestock. 
Although the GOM has responded with an emergency drought assistance 
plan, critics complain the plan lacks substance and is a case of 
"too little, too late."  With the cereal harvest still two months 
away, the economic impact of the drought has only just begun.  End 
Summary. 
 
---------------------------------------- 
Short Crop, Thirsty and Skinny Livestock 
---------------------------------------- 
 
¶2. (U) Actual rainfall is more than 50 percent below normal in many 
of Morocco's principal cereal growing regions.  As almost 90 percent 
of Moroccan cereal crop is not irrigated, the shortfall is having a 
severe impact on this year's crop.  According to the U.S. Foreign 
Agricultural Service (FAS), the wheat and barley harvest for 2007 
could fall as low as 3.2 million tons, which is well below 2005's 
depressed harvest of 4.2 million tons.  By comparison, 2006 was an 
exceptional year with the 8.9 million ton harvest a principal factor 
in the country's record GDP growth rate of 8.1 percent. 
 
¶3. (U) The drought is also having a dire effect on livestock.  With 
a shortage of available pasturage, the drought is causing soaring 
feed prices.  Khmiss Zmamra, between El Jadida and Agadir, is one of 
the hardest hit areas, with farmers reporting hay prices double and 
corn feed prices triple a year ago.  Unable to afford feed, many 
farmers have been or will be forced to sell-off their stocks, often 
for only a portion of their value a year ago. 
 
---------------------------------- 
Government to the Rescue - Sort Of 
---------------------------------- 
 
¶4. (SBU) In response to the looming crisis, the GOM announced an 
emergency drought plan in January. The plan includes compensation to 
farmers for debt relief, distribution of drinking water and animal 
feed to the hardest hit rural areas, and reduced or eliminated 
import duties on a number of feed grains and ingredients.  (Note: 
In March, the GOM zeroed the import duty for corn, effectively 
nullifying the preference rate American producers were accorded 
under provisions in the U.S.-Morocco Free Trade Agreement.  End 
note.) 
 
¶5. (SBU) Farmers have widely criticized the GOM's response.  Ahmed 
Ouayach, President of the Moroccan Agriculture Confederation, calls 
it short-sighted and wholly inadequate in dealing with the chronic 
water problems of Moroccan farmers.  According to Ouayach, drought 
conditions are the norm in Morocco, with good harvest years, such as 
2006, the exception.  Yet, according to Ouayach, the GOM reaction is 
limited to the year in question, without any lasting effect for 
following years.  Among Ouayach's recommendations are reform and 
expansion of the farmers' cereal production insurance program, 
interest-free loans for drought assistance, financial incentives for 
the transition to more drought resistant crops, and subsidized 
transportation costs for drought areas. 
 
¶6. (U) Farmers in the Zmamra region are even more blunt, describing 
the government's action to date as a joke.  During a recent forum 
covered by the press, farmers complained of receiving neither food 
nor water for livestock.  One local leader acknowledged that the 
area had been granted a small feed subsidy of 90 tons of barley, but 
said it had yet to be distributed and would be wholly inadequate 
when it was.  He explained that the subsidy is to be divided among 
16 communes, resulting in an allocation of 10 kilograms per farmer, 
enough to feed a single cow for only three days. 
 
--------------------------------------------- - 
Agriculture Remains Strong Economic Indicator 
--------------------------------------------- - 
 
¶7. (U) Although Morocco has made major strides in diversifying its 
economy, agriculture remains the country's largest employer and a 
strong indicator of economic performance, accounting  for 
approximately 40 percent of all employment and 15 percent of GDP. 
In 2005, the cereal harvest was less than 4.2 million tons, 
resulting in an agricultural sector contraction of 2.7 percent and 
an overall GDP growth of only 1.7 percent.  By contrast, the 2006 
 
RABAT 00000627  002 OF 002 
 
 
cereal harvest of 8.9 million tons resulted in an agricultural 
sector increase of 3.0 percent and a record GDP growth of 8.1 
percent. 
 
¶8. (SBU) Comment:  The direct consequences of the drought vary 
greatly between regions.  Conditions in the north and along the 
coast are much better than in the south and interior.  As 
significant to farmers as the amount of rain was the late start of 
this year's rainy season, which pushed back planting as much as two 
months.  Then, many crops in the hardest hit areas were stunted by a 
new period of drought.  To date, the government response has had 
limited impact, outside the zeroing of import quotas for corn and 
other livestock feed. 
 
¶9. (SBU) Comment continued:  From the International Monetary Fund to 
the Oxford Business Group, everyone seems to agree that the macro 
economic fundamentals of Morocco are sound .  Nonetheless, if the 
2007 cereal forecast of 3 million tons holds true, we can expect 
overall growth to again fall below 5 percent.  End Comment. 
 
RILEY