Reference Date: 21-August-2014
FOOD SECURITY SNAPSHOT
Below-average wheat crop harvested in 2014
Wheat import requirements forecast at above-average levels in 2014/15
Inflation rates ease
Food security situation improves, but vulnerable groups in parts are still a concern
Drought conditions affect wheat production in 2014
The 2014 wheat harvest was completed in July although final production estimates are not yet available. However, preliminary forecast puts the 2014 wheat production at 13 million tonnes, 7 percent lower than the 2013 wheat harvest due mainly to drought conditions that affected yields
Since the beginning of the fiscal year in March 2014, the Government purchased 6.5 million tonnes of wheat domestically at the cost of about 69 trillion rials (USD 2.58 billion on the official rate of 26 543 rials per dollar). Compared to the same period last year, the Government purchases increased by about 2.4 million tonnes. The Government plans to decrease reliance on imported wheat over the next four years.
Wheat and barley are the main crops cultivated in the country. Wheat is the dominant cereal crop accounting for almost 70 percent of the aggregate cereal production. Irrigated wheat covers only one‑third of the total wheat area, thus the bulk of the wheat crop depends on the performance of seasonal precipitation. Most of the rainfed wheat crop is concentrated in the north‑western region of the country. Small amounts of rice and maize are also produced in the country.
Cereal imports expected to increase in 2014/15 compared to last year
To offset below-average production, Iran’s state grain buyer continues to build its strategic stocks in light of concerns about domestic food security. Iran has been active on international wheat market taking advantage of low prices. Buyers face payment issues as banks steer away from financing the deals. Reports indicate that significant amounts of grain and sugar are caught in various transits due to payment problems.
Total cereal imports are forecast at 12.6 million tonnes in 2014/15 (April/March) - consisting of maize (4.8 million tonnes), wheat (6 million tonnes), rice (1.6 million tonnes) and barley (1 million tonnes) - about 14 percent more than last year’s and some 34 percent above the average of the last five years.
In July 2014, the Government increased the import duty on basmati rice to 40 percent (up from 22 percent previously) and raised the accepted level of arsenic in supplies to 120 ppb (parts per billion), up from 80 ppb.
Inflation easing, subsidy reform progressing
The Central Bank maintains the fixed subsidised rate of about Iranian Rial Rates (IRR) 26 000 per US dollar introduced in early July 2013, although the unofficial market rate remains substantially weaker contributing to increased concerns about food security by limiting the purchasing power of the population, especially of the poor.
The latest official information available from the Central Bank indicates that in June 2014 the food and beverages price inflation index, stood at 1.6 percent on monthly and 4.2 percent on yearly basis. For comparison, in June 2013 food price inflation was above 50 percent on year-on-year basis.
Facing budgetary concerns, in 2010 the Government attempted to phase out the subsidy programme on fuel, electricity and some commodities and replace them with a cash transfer at IRR 455 000 per person (about USD 37 at the pre‑devaluation rate of IRR 12 260 per USD). The second round of subsidy reforms took place in spring 2014, increasing prices of electricity (by 24 percent), water (20 percent) and subsidised petrol (by 72 percent). At the moment it remains unclear how much the compensatory payment will be scaled back.