Suspension of customs duties on oilseeds and crude oils: minimal impact on prices

Suspension of customs duties on oilseeds and crude oils: minimal impact on prices

In order to mitigate the effects of rising raw material costs on the domestic market, the government has decided to suspend customs duties on the import of oilseeds. However, the effect would be little apparent on the prices practiced.

80% of Morocco’s imports, in crude oils, are subject to 0% customs duties. These imports come from the signatory countries of the bilateral agreements signed by Morocco and the United States, as well as from other European countries. This is to say that, in the current context of continuous rise in commodity prices, the impact of the suspension of customs duties remains minimal.

It should be recalled that the Council of Government adopted, on Thursday June 2, draft decree No. 2.22.393 establishing the suspension of customs duties on the import of oilseeds and crude oils. The decision aims “to mitigate the impact of the increase in the cost of raw materials on the selling price of the most consumed table oils”, noted Mustapha Baitas, government spokesman.

In detail, the decision concerns the suspension of import duties applicable to oilseeds and crude sunflower, soybean and rapeseed oils, since June 3, 2022. While the government’s decision and efforts are to be welcomed, in a In a context marked by significant inflation and soaring international input prices, the fact remains that it concerns only a small part of the country’s total imports.

Indeed, the rest of the imports (20%) mainly come from countries such as Argentina and Ukraine with customs duties of 2.5%.

10 cent impact on the price
It should be noted that in 2021, the European origin represented 80% of oil imports, while the Argentinian origin constituted only 20% of Morocco’s total soybean imports. In figures, the calculation is clear, the 2.5% measure gives a direct impact of 300 DH/tonne (Argentina origin). Reduced to the litre, the apparent impact would be around 30 cents, again for a 100% origin from Argentina.

That is to say that on the basis of imports of 80% from Europe and 20% from Argentina, the impact becomes around 10 cents. That said, the government’s decision remains interesting in the present case (elimination of 2.5% customs duties, origins other than Europe and the USA. Because it will ultimately make the market more import competitive.

High dependency of the national market
Since March 2020, the outbreak of the Covid pandemic has pushed prices up due to climate disruptions around the world, coupled with unfavorable weather in several oilseed producing regions.

In addition, the war in Ukraine has accentuated the situation, since the country is the main European producer of sunflower oil, hence the surge in vegetable oil combined with the unavailability of oils worldwide. The price of oil does not stand out, it has pushed towards the doubling or even tripling of logistics costs and maritime freight worldwide, in addition to the increase in the cost of biodiesel, which is showing strong global demand.

Producers adapt
In this very particular context, the national producers of table oils have adapted. They have fulfilled their civic duty and have so far succeeded in supplying the local market with edible oil while delaying the impact of the effects of this situation on the final price of edible oil. However, as observed on the market, supporting the increases of the instants, for several months, directly impacts the finances of the national producers.

Moreover, the latter are faced with a lack of visibility. What should be noted, in this sense, is the fact that the future of the oil market in Morocco depends on “national sovereignty” in terms of cultivation and crushing of oilseeds. It should be remembered in this logic that the association of oil producers in Morocco is working with the government to establish mechanisms to facilitate the production of oilseeds at the local level.

This solution remains, in all likelihood, the only alternative to protect Morocco against soaring international prices, and it should be prepared well in advance.

Sanae Raqui / ECO Inspirations

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