by Ann Courtmanche, U.S. Wheat Associates market analyst

There is no question that the U.S. wheat industry is facing a volatile market in North Africa. Morocco, which is one of very few countries in the world that imported 5 of the 6 U.S. wheat classes in the past year, has hardly bought any U.S. wheat this year. Tunisia, which is extremely sensitive to price movements and which has a history of wide shifts in supply sourcing, has not yet purchased any U.S. wheat during this marketing year. On the other hand, Libya, previously sanctioned by the U.S., has purchased a shipment of hard red winter wheat, after making no purchases in 2003/04. And Algeria, the largest durum importer in the world, is the largest U.S. durum buyer thus far in 2004/05.

"North Africa still holds important potential for the U.S.," says USW regional vice president George Galasso. "Its rapidly increasing technical sophistication will best benefit the world's most diverse supplier. Millers and importers are turning business plans on their heads, with far greater attention to product performance and processing economies."

In all of these countries, facing cheaper Argentine wheat and possibly new subsidies for French wheat, USW is making a concerted effort on behalf of America's wheat producers. Last year, USW brought Peter Lloyd back from a position with a private company in the UAE, and he is now running our Technical Outreach Program from Tunis. He joined Salah Mahjoub, a highly respected agriculture and trade expert from Tunisia who joined USW in 2002, and both of them work extensively throughout the region. Mina El Hachimi is USW's program administrator in Casablanca, where USW works closely with the IFIM milling school (established in 1991 by USW and the Moroccan Millers Federation.)

"The future for USW in this region is very clearly linked to providing high quality, functionally specific, improver wheats," Lloyd explains. "We are actively promoting U.S. wheat quality across all aspects of the industry, from specification to finished products. We believe that a clear understanding of the roles of functionality, quality and profitability, blended together in the right proportions, make the case for U.S. wheat."

Morocco -- highly rated in technical sophistication

Morocco is a 1.3 - 4.7 MMT market where the U.S. market share has fluctuated widely, between 2% and 30%. Continuing its technical program with millers, USW is increasing its focus on quality based initiatives and product diversification. Morocco's millers are well able to assess intrinsic wheat value, and are adopting wheat blending as a standard practice, which should benefit U.S. imports. But perhaps the most hopeful development is the recent approval by the Moroccan legislature of the U.S.-Morocco Free Trade Agreement. U.S. and Moroccan government officials discussed the provisions of the FTA with Moroccan importers during USW's recent crop quality seminar, and the agreement goes into effect in March.

Algeria -- intense international competition

Since the end of U.S. wheat export subsidies in 1995, Canadian durum largely displaced U.S. hard amber durum (HAD) in Algeria due to CWB monopoly-pricing powers. The CWB now supplies anywhere from 35 to 55 percent of durum imports. But Algerian millers understand the role of blending to achieve specific qualities and they recognize HAD as an important improver wheat for color. Additionally, millers enthusiastically greeted Algeria's first shipment of desert durum, which was promoted by USW and which sold at a considerable premium.

Algeria's non-durum wheat competition comes largely from the EU (principally France with 20-50% market share, followed by Germany), and, when available, the Black Sea. But private industry is growing in Algeria, and its increasing sophistication presents a good potential growth market for using U.S. wheat as a functional improver in flour blends. Again, understanding quality/price relationships and the role of blending to achieve specific qualities, buyers will hopefully import more hard red winter and soft red winter wheat when they are competitively priced.

Tunisia -- focusing on value

Tunisia is principally a non-durum wheat importer, importing 700-900,000 MT. Durum is only occasionally imported (up to 550,000 MT), usually because drought reduced the local harvest. Imports are dominated by the Tunisian Cereals Office (OCT). Although the best U.S. long-term prospects are for increased market share once liberalization takes place, we have also been meeting with all sectors of the OCT staff, including purchasing, technical, lab and compliance professionals, focusing in depth on USW's "Blend Calculator." The calculator essentially measures financial impact of wheat purchasing decisions on the downstream process in the mill. When USW consultant Peter Lloyd used the calculator to explain, during sessions held in October, that "least cost wheats are not necessarily the best bargain,” OCT officials recognized the potential for improvement.

Libya -- new potential for U.S. wheat

Libya imports almost 100% of its wheat and product needs for high quality, high protein flour. Amounting to as much as 1.8 MMT annually, imports roughly break down to 400-500 TMT non-durum wheat and 300-400 TMT durum wheat. The breakdown between wheat and flour is often determined by tendering issues. NASCO, historically the official government buying agency, purchases wheat and sells it at a government determined price to an agency known as Tahlef, which in turn sells flour, semolina and pasta back to NASCO. NASCO then sells the products to bakers and at retail stores. Until recently, NASCO made all the purchases by means of several private tenders sent out to all NASCO-registered companies, but now Tahlef is beginning to import directly.

USW, which recently presented our first U.S. wheat quality seminar to 85 industry and government representatives in Tripoli, has discussed with the Libyans several potential activities, including a Libyan trade team to the U.S. and the opportunity for millers and lab technicians to receive training at the milling school in Morocco. While they have been very quick to grasp the nuances of the U.S. marketing system, the mere existence of sanctions for so long provides ample reason for activities that will re-acquaint them to the various industry facets in the U.S.