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Highlights

Prospects for Algeria’s wheat and barley crop remain mostly average despite multiple bouts with dryness throughout the year and with the next 30 days being a critical period. At the same time, multiple new policies have or are soon to take effect and will impact the import and consumption of feed grains while impacts to wheat are likely to be minimal.

Executive Summary

Following delayed plantings in some areas, nearly every region in Algeria received rain December through February 2017, which replenished soil moisture and mitigated early season dryness. At this stage, Post expects an average crop while conditions in late April and early May remain critical. As a result of fiscal pressures caused by depressed oil prices, the Government of Algeria (GOA) continues to implement new measures to control imports.

• Algeria has announced plans to implement the import licensing system for all non-essential products except basic products such as semolina, wheat, oil, sugar, milk and medicines, which would be automatically renewed to prevent market shortages, however, the effective start date remains uncertain. Wheat and wheat products are considered essential while barley and other feed grains will be impacted.

• Effective January 1, 2017, Algeria’s new Finance Law increased the value added tax (VAT) on a number of products. Wheat remains VAT-exempt, while the VAT rate on wheat products, barley, and other feed grains will increase from 7 to 9 percent.

• Barley trade was also partially liberalized by eliminating the preset price that feed mills could purchase barley from the Algerian Office of Cereals (OAIC), which was previously set at Algerian Dinar (AD) 15,000/MT ($1=AD109). Meanwhile, OAIC will maintain the farm-gate price of AD 25,000/MT for producers.

Wheat

Post forecasts Algerian wheat production for MY 2017/18 at 2.7 MMT on 2.1 million hectares. Imports are forecast at 8.0 MMT, including 60,000 MT from the United States. Post forecasts consumption to be held constant while Algeria still attempts to build strategic stock reserves.Post leaves all 2016/17 wheat estimates unchanged, including production of 2.0 MMT and imports of 8.2 MMT.

Barley

Post forecasts Algerian barley production for MY 2017/18 at 1.3 MMT on 1.0 million hectares. Post leaves all 2016/17 barley estimates unchanged, including production of 1.0 MMT and imports of 900,000 MT.

Production

3.5 million hectares were seeded to wheat and barley for MY 2017/18, including 45% to durum wheat, 37% to barley, and 15% to bread wheat. Durum and barley production are favored over bread wheat for climatic reasons. This year, the Algerian Office of Cereals (OAIC) acquired land in various regions, particularly in the south, to begin irrigated durum wheat production. Barley is cultivated along the coastal plain and mountains, generally on marginal land with annual rainfall of about 20 inches.Hot and dry conditions in October and November depleted soil moisture and delayed winter plantings in some regions in Algeria. However, since then, nearly every region received rain and snow by early 2017 to replenish soil moisture and mitigate early season dryness. Nevertheless, bouts of dryness have continued to come and go. A return to good crop conditions will be critical for the remaining month of April and early May.

As of April 08, 2017, MOA bulletins indicated the following stages of crop development which are more or less at the same growth stage as last year:

• Wheat

- Swelling to starting heading in the coastline and sub-coastline center

-Starting heading in the eastern region of the coastline center

- End bolting to starting heading in the western coastline and sub-coastline

-Early bolting in the center high plateaus, late tillering in eastern high plateaus and bolting to swelling in the western high plateaus.

• Barley and Oats

- Heading in the three regions on the coastline and sub-coastline

- Bolting to swelling in the center and eastern high plateaus and end of bolting in western high plateaus.

Consumption

The cereal consumption has more than doubled in the past 50 years to 285 kg per capita. The level of wheat supplied to mills is still 70 percent of the mills capacities, for both durum and bread wheat. Milling capacity is projected to remain more or less stagnant with 430 mills operational in Algeria. There has been no new investment in the sector in recent years.

Wheat

Wheat is the major staple food and accounts for about 75 percent of the calories consumed.Post forecasts wheat consumption flat at 10.25 MMT in 2017/18. Wheat remains unaffected by recent changes to VAT, import licensing, and subsidy programs.

Barley

Barley is consumed mainly as grain in animal feed by sheep, cattle, and camels, with small amounts consumed as green fodder, and minor amounts used for traditional foods. Barley’s use as a feed remains highly dependent on pasture conditions – in general, better pastures result in lower barley demand. Algeria’s breweries consume small amounts of barley, generally imported from Europe. Post forecasts barley consumption to fall in 2017/18 to 1.9 MMT. A higher VAT on barley (as well as other feed grains).

Trade

Cereals represented 34 percent of the Algeria’s total food import bill in CY2016 and as always were the top food import. Total wheat imports represented 65 percent of the cereals imported in CY2016 and were valued at $1.79 billion compared to the previous year valued at $2.39 billion. Durum imports were valued at $549.5 million compared to last year ($783.5 million).Algeria’s tactics to reduce imports will likely have the effect of slowing import growth. Thus far in MY2016/17, imports have increased for durum while decreasing for barley, corn, soybean meal, rice, and pulses and slightly for bread wheat.

Aside from price competitiveness, European suppliers have better shipping flexibility vis-à-vis the United States. France remains the major wheat supplier to Algeria for bread wheat and Canada and Mexico for durum.

Wheat

Post forecasts wheat imports in 2017/18 will fall to 8.0 MMT in response to flat consumption demand. Bread wheat will continue to occupy the vast majority of Algeria’s wheat imports as it focuses on self-sufficiency in durum production. Bread wheat usually represents 75 to 80 percent of the total wheat imported while durum imports represent 20 to 22 percent.

Barley

Algeria’s barley imports are heavily influenced by weather — better weather not only means higher local barley production but also lower consumption vis-à-vis better pasture conditions, both of which decrease import demand.Post forecasts barley imports in 2017/18 will fall to 600,000 MT. Post’s 2016/17 estimate remains unchanged at 900,000 MT.

Corn

Algerian corn demand stems from Algeria’s dairy and beef sectors, which the government still places a priority on developing. Algeria maintains preference for certain qualitative aspects and specifications of Argentine corn over U.S. corn. Corn imports are primarily carried out by the private sector (90 percent) while the remainder is covered by Algeria’s Feed Grain Agency (ONAB).

DDGS

Algeria’s poultry and livestock producers experimented with DDGS in 2013 and 2014, but the 30 percent duty and the recent increase in VAT discourages further use of the product.

Soybean Meal

Demand for soybean meal comes mainly from Algeria’s poultry feed industry. However, imports decreased in CY2015 and CY2016 due to recent measures to reduce total imports. Aside from price, Algeria has preference for certain Argentine qualitative aspects and specifications.

Rice

Evolving consumer demand led to increased rice imports over the period 2006-13; however, Post believes recent declines are a result of government measures to reduce total imports.

Pulses

Algeria’s imported pulses are mostly beans, lentils, chickpeas, and beans for seeding. U.S origin exports consist mainly of chickpeas, lentils, beans, and peas.

Stocks

In recent years, OAIC tendered the construction of 39 silos (30 steel and 9 reinforced concrete) for durum, bread wheat, and barley to increase storage capacity from more than 5 MMT to add 0.82 MMT of capacity in 2012 with plans to add an additional 0.84 MMT by 2019.

Policy

The country targets to increase annual grain production via yield improvement to 7.0 MMT and ultimately become self-sufficient in durum by 2019. Ten percent of Algeria’s arable land is irrigated while the targets hope to reach 2.0 million hectares by 2019. MOA subsidizes 50 percent of the irrigation equipment cost and supports greater use of fertilizers and certified seeds, increased specialized mechanization (e.g., tractors, planters, and harvesters and combines harvesters) as well as improved storage facilities by building new silos. The strategy also renewed interest in domestic corn production, where it is now produced in some southern provinces and average yields range from 1.3 to 8.0 MT/Ha; however, a number of technical constraints persist.

In order to curb the impact of lower crude oil prices on the Algerian economy, given that 97% of Algeria’s earnings are generated by oil exports, in 2015, the GOA introduced an import and export licensing system (Journal Officiel No 66 of December 9, 2015) starting with agricultural commodities and goods originating from the European Union. In 2017, a Ministry of Commerce press release announced that import licensing would be extended to all “non-essential” products except basic products such as semolina, wheat, oil, sugar, milk and medicines, which would be automatically renewed to prevent market shortages. The changes were meant to control supply levels while supporting domestic production. The effective starting date for the application of the new measures remains unknown for the time being.Effective January 1, 2017, the new Finance Law increased VAT rates on concerned goods from 7 to 9 percent and 17 to 19 percent for several non-grain and feed products. The barley domestic resale price subsidy in place since 2008 was also removed. Previously, OAIC bought, stored, and marketed domestic barley by providing the producer a guaranteed support price of Algerian Dinar (AD) 25,000/MT ($1=AD109) while offering the same barley to the domestic buyer (e.g., mills and livestock producers) at the set price of AD 15,000/MT. At the same time, OAIC would also import barley at world price levels and resell it at the same price as it marketed domestic barley – AD 15,000/MT. OAIC still offers the producer support price, but the barley will now be sold at market value.

Marketing

FAS Cooperators, including U.S. Wheat Associates (based in Casablanca, Morocco), the U.S. Grains Council (based in Tunis, Tunisia), and the U.S. Soybean Export Council have active market development programs to educate Algerian millers, importers, feed manufacturers, and poultry and dairy cattle farmers on the quality and reliability of U.S. commodities. are currently engaged in various in Algeria. These activities, which include technical workshops, seminars, trade missions, and technical exchange programs in the United States, are needed to open the Algerian market to the benefits of increased trade with the United States.

Wheat

2015/2016

2016/2017

2017/2018

Market Begin Year

Jul 2015

Jul 2016

Jul 2017

Algeria

USDA

Official

New

Post

USDA

Official

New

Post

USDA

Official

New

Post

Area Harvested

2100

2100

1300

1300

0

2100

Beginning Stocks

3768

3768

4357

4357

0

4292

Production

2700

2700

2000

2000

0

2700

MY Imports

8153

8153

8200

8200

0

8000

TY Imports

8153

8153

8200

8200

0

8000

TY Imp. from U.S.

69

69

0

0

0

60

Total Supply

14621

14621

14557

14557

0

14992

MY Exports

14

14

15

15

0

0

TY Exports

14

14

15

15

0

0

Feed and Residual

50

50

50

50

0

50

FSI Consumption

10200

10200

10200

10200

0

10200

Total Consumption

10250

10250

10250

10250

0

10250

Ending Stocks

4357

4357

4292

4292

0

4742

Total Distribution

14621

14621

14557

14557

0

14992

Barley

2015/2016

2016/2017

2017/2018

Market Begin Year

Jul 2015

Jul 2016

Jul 2017

Algeria

USDA

Official

New

Post

USDA

Official

New

Post

USDA

Official

New

Post

Area Harvested

1000

1000

900

900

0

1000

Beginning Stocks

1304

1304

1290

1290

0

1140

Production

1300

1300

1000

1000

0

1300

MY Imports

836

836

900

900

0

600

TY Imports

864

864

900

900

0

600

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

3440

3440

3190

3190

0

3040

MY Exports

0

0

0

0

0

0

TY Exports

0

0

0

0

0

0

Feed and Residual

1800

1800

1700

1700

0

1600

FSI Consumption

350

350

350

350

0

300

Total Consumption

2150

2150

2050

2050

0

1900

Ending Stocks

1290

1290

1140

1140

0

1140

Total Distribution

3440

3440

3190

3190

0

3040

57 Commodity exchange