Algeria Agribusiness Report Q1 2013

With wheat and dairy production systematically short of consumption, Algeria is a major importer of foodproducts. The 2012/13 season will be no exception to this trend, although wheat output is expected tojump, helped by favourable weather. Although imports are likely to mainly come from traditionalsuppliers such as European countries this season, Algeria is increasingly expanding trading links withcountries such as Brazil and India, especially for dairy and beef products. Although food price inflationhas ticked slightly higher since July, the country’s food security is likely to remain fairly stable in thecoming months owing to high supplies from the summer harvest.

Key Views

Wheat production growth to 2016/17: 31.8% to 3.7mn tonnes. Wheat production willbe supported by increased investment in irrigation and improved use of plant geneticsand certified seeds and fertilisers.

Milk consumption growth to 2017: 27.8% to 2.0mn tonnes. In addition to higher levels ofdisposable income and the increasing availability of a more diverse array of dairy products onthe local market, government-subsidised milk – sold at fixed prices – will underpin our relativelystrong dairy consumption outlook to 2017.

Barley production growth to 2016/17: 48.5% to 2.0mn tonnes. Our forecast errs on the side ofcaution. Significant changes to the size of the harvested area from one year to the next are afairly regular occurrence in Algeria, reflecting the limited availability of water and irrigation.

BMI universe agribusiness market value: US$2.4mn in 2013; growth to average 2.0%annually between 2011/12 and 2016/17.

2013 real GDP growth: 3.6% (up from 3.2% in 2012; predicted to average 3.4% over 2012-2017).

Consumer price inflation: 7.8% in 2013 (down from 5.2% in 2012).

Slight Improvement In Deficit
Algeria – Wheat Production Balance, ‘000 Tonnes
f = BMI forecast. Source: BMI, USDA

Key Developments

Nestlé opened a new milk powder factory close to capital city Algiers, in October 2011. This factoryfollows a commitment by the Algerian government to open up trade and encourage internationalcompanies to establish a presence and help to boost local production. Private companies have begun toparticipate in local milk collection, helping collection to grow from 390mn litres in 2009/10 to 688mnlitres in 2011/12. Although the private sector plays a dominant role in the Algerian dairy sector, stateownedgroup Giplait remains the leader in the pasteurised reconstituted milk market. The company owns15 of the total 120 dairy processing facilities in the country.

We expect Algerian wheat production to jump in the 2012/13 season starting in July 2012, as favourablesoil conditions are currently supporting crops and yields. Algeria’s chronic wheat production deficit isexpected to narrow in 2012/13 amid higher production and subdued growth in consumption. Thegovernment decided to ramp up utilisation rates for wheat mills in recent months, which increased supplyon the domestic market and relieved prices. Record high production and relatively high ending stocks arelikely to reduce the country’s need for wheat imports and will help to alleviate global markets.

A perennial issue with Algerian grain production is that only around 2% of Algeria’s grain area isirrigated. With such an arid climate, this is a significant constraint in improving yield levels, leavingfarmers extremely vulnerable to volatile weather. The government appears to have acknowledged theissue and plans to increase the area of farmland under irrigation from 1.1mn hectares (ha) to 1.6mn ha by2014.