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Islamic Republic of Iran wheat trade prospects

Islamic Republic of Iran: a major wheat importer turning self-sufficient?

For the first time in recent memory, the Islamic Republic of Iran has approached self-sufficiency in wheat, the main food staple of the country. A record production in 2004, following an already bumper crop in 2003 has raised hopes that the long-awaited self-sufficiency has become a norm rather than an exception. However, sustaining production at levels sufficient to meet the growing domestic consumption requirements will be a difficult and challenging task. Although strong government support for wheat production has played a large part in raising output, favourable weather in the past two years has also contributed towards the bumper results, and both will be needed if Iran is to remain close to wheat self-sufficient in the future.

Until recently, Iran relied on large wheat imports to meet its growing domestic demand. This made Iran rank among the world’s leading wheat importers, with an annual intake ranging from 2.5 to 7.5 million tonnes over the past two decades. The 2002/03 marketing season marked an important break in a long-lasting drought that hampered domestic production for several years, initiating the start of sharp declines in foreign wheat purchases. By 2004/05, wheat imports were forecast to have fallen to only 200 000 tonnes; relatively insignificant for a country where as much as 12 million tonnes of wheat is destined for food, mostly in the form of bread. In fact, in terms of per caput wheat consumption, Iran’s estimated 165 kg per annum is among the highest in the world.

Water availability is central to Iran’s ability to produce wheat, as is often the case for most drought-prone countries with erratic climatic conditions. At least 40 percent of Iran’s wheat is rainfed with an average yield of only 0.8 tonnes/ha. However, even under the irrigated land, the average wheat yield in Iran rarely exceeds 3.0 tonnes/ha, less than half that of Egypt’s 6.4 tonnes/ha. In 2004, good and timely precipitation lifted the average wheat yield (irrigated and rainfed) to 2.3 tonnes/ha, slightly below the world average of around 2.6 tonnes/ha.

In recent years, the Government has made wheat self-sufficiency a very high priority and stepped up efforts to increase wheat productivity. Over the past two years, the Government sharply raised spending on wheat farming by supplying higher yielding seeds, improving machinery services, augmenting fertilizer usage and enhancing water systems and pest management practices. In addition, to increase farmers’ incentives, the guaranteed procurement prices have been raised significantly, up another 10 percent again this year for 2005 crops. While in US$ terms, the domestic prices have usually remained above world levels, the transport cost, and more specifically the recent surge in ocean freight rates, increases the actual cost of imports, resulting in wheat import prices to approach or even exceed the domestic guaranteed levels.

Official indications are that the country will continue with its self-sufficiency target also in the coming years, by trying to raise productivity further. In the short-term, very favourable weather conditions again this winter, coupled with continuing government support, point towards above-average production also in 2005. This would enable Iran to remain virtually self-sufficient for at least another season.

Looking further ahead, the preliminary results generated by FAO’s newly--created Commodity Simulation Model (COSIMO) indicate that under a normal weather assumption, average yield in 2010 is unlikely to exceed the 2.3 tonnes/ha high achieved in 2004. As a result, and in view of the fact that further expansion of area is generally constrained because of water scarcity, domestic production is projected to approach 15 million tonnes by 2010. However, at the same time, total domestic consumption is also projected to expand, mainly driven by population growth. The anticipated rise in income seems unlikely to deter bread consumption in favour of more value added food unless the Government decides to reduce the long-standing bread subsidy. With food consumption rising and other uses (including feed, seed and post harvest losses) also increasing, total domestic consumption seems to stay persistently above the projected production throughout the medium-term. As a result, importing wheat may become necessary again although not in such significant quantities as in the 1990s.

 

Tsunami: the impact for food supplies in 2005

Food supply and food security situation in countries affected by the Indian Ocean tsunami1/

The earthquake and tsunamis of late December 2004 that resulted in severe human losses and extensive damage to infrastructure, affected 12 countries in the Indian Ocean. The worst affected include Indonesia, Sri Lanka, the Maldives, India and Thailand, with other countries suffering relatively limited damages. Fisheries were the worst-hit by the tidal wave, while FAO’s assessments of crop and livestock losses in affected coastal areas indicate that damage has been localized and that its impact on national food production and supplies is limited. Nevertheless, the extent of infrastructure collapse in the agricultural sector, as well as the land and forest degradation may have long-term impacts on crop production.

Supplies at regional level adequate to cover food aid requirements

Overall food availability in the region appears adequate to cover the immediate food assistance needs. Among the countries most severely affected by the wave surges, Thailand and India are consistently large exporters of rice. Indonesia, while a food importer, gathered a bumper paddy crop in 2004 and carried adequate levels of stocks. Sri-Lanka had a relatively large rice deficit last year but a recovery in paddy production is forecast in 2005. The Maldives are a net importer, but their relief food needs could be covered by supplies in neighbouring countries.

Household food security affected

Even in cases where national food supply and food security impacts are limited, local communities will experience severe food security impacts in the short and long-term. It is estimated that 2 million people in different countries in the disaster region are in need of emergency food assistance, mostly in Indonesia, Sri Lanka and the Maldives. WFP plans to distribute 169 000 tonnes of food aid to 2 million neediest people over a period of six months. Some 1.3 million beneficiaries have received food aid since the advent of the disaster. Huge investments are needed for rehabilitation and reconstruction. FAO has appealed for US$20 million to finance emergency fishery and agriculture projects, but plans to appeal for additional funds for the rehabilitation and reconstruction phase.

1.  The full assessment paper written by FAO’s Economic and Social Department is available on the Internet as part of the FAO World Wide Web at the following URL address: http://www.fao.org/giews/english/shortnews/asiatsunami050114.htm.