An agricultural policy and trade model for Morocco

The properties of duality were exploited in developing an integrated system consistent with endogenous behavior of producers, consumers, and government for Moroccan agriculture. A multi-output, multi-input normalized quadratic profit function was used to derive product supply equations for crops and livestock products and variable input demand equations for fertilizer, grain feed, and other feed products. For domestic demand and import share equations, an AIDS framework was applied to derive demand elasticities. As an alternative to the traditional excess demand approach, and to represent the outcomes of a reformed and open cereal sub-sector in Morocco, the study introduces a module that endogenizes government behavior of cereal imports. The study took a bold first step toward incorporating a policy structure in a theoretically sound framework for soft wheat price determination. The results of statistical tests show that convexity of profit function is rejected, cereal production is integrated with that of livestock, and the Armington trade model is not suitable for Moroccan cereal imports. Furthermore, policy analysis indicates that the abandonment of government policy in soft wheat market results in a decrease in producer price and an increase in consumer price. In addition, an elimination of concessional U.S. exports and food assistance to Morocco appears to increase commercial imports of soft wheat. The U.S. export share decreases while the EU seems to gain from this policy with increased export share.