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Country Briefs

  Iran (Islamic Republic of)

Reference Date: 17-April-2019


  1. Recent floods disrupted favourable conditions for winter crop development

  2. Further increases in food inflation following currency devaluation likely

Recent floods disrupted favourable conditions for winter crop development

Harvesting of the 2019 winter season barley crop started in March. The wheat harvest will start in June. Up to March, conditions for the development of the winter cereal crop were exceptionally favourable, as rains started on time and rainfall amounts were abundant along the whole season, promising an above average harvest. However, torrential rain at the end of March led to major flooding across the country, affecting more than 20 provinces, with Mazandaran, Golestan, Lorestan and Khouzestan being the most affected areas, resulting in casualties, economic losses and severe infrastructure damage. The worst affected areas of Golestan Province received 70 percent of the average annual rain in the first 24 hours of the downpour. According to the Ministry of Agriculture Jahad, Golestan Province produces about 10 percent of the total wheat output. Across the other heavily affected areas, rainfall totals for the two days at the height of the downpour were above the average rainfall normally received throughout the whole month. Losses caused by floods are estimated to be between USD 3.5 to USD 4.1 billion, including USD 1.5 billion in the agriculture sector.

In the current season, about 5.85 million hectares of wheat were planted, including 2 million hectares with irrigation. Following the floods, the national authorities downgraded the national cereal harvest from excellent to good, likely to be similar to last year. The final production figures will depend on the impact of floods.

The Government intends to locally purchase about 10 million tonnes of the 2019 wheat harvest with the aim to eliminate the reliance on imports for domestic consumption. In 2018, the Government purchased 9.3 million tonnes of wheat. In April 2019, the Government announced an increase in the guaranteed purchase prices for the 2019 crop compared to last year: IRR 17 000 per kg (equivalent to USD 405 per tonne, up from IRR 13 000 in 2018) of common wheat and IRR 17 700 per kg (USD 420 per tonne, up from IRR 13 300) of durum wheat.

In January 2019, a deal among the Islamic Republic of Iran, Kazakhstan and the Russian Federation was concluded on the supply of wheat via the Caspian Sea in order to increase the utilization of the Iranian wheat flour mills with excess capacity and, consequently, expand the Iranian exports of flour to third countries via the Persian Gulf. The Iranian private millers are not allowed to use the domestic wheat destined to supply the domestic market for flour exports. All wheat imports are meant to be re-exported, while domestic wheat is only consumed in the country.

Increases in food inflation following currency devaluation

The latest official information available from the Central Bank indicates that, in the period from 19 February 2019 to 20 March 2019 (corresponding to Esfand 1398), the food and beverages price inflation index climbed to 72 percent on a yearly basis, driven by the devaluation of its currency related to the full re-imposition of economic sanctions in November 2018. The sanctions severely limit export earnings. By comparison, in the same period in 2018, the food price inflation stood at 7 percent on a year‑on‑year basis.

The Central Bank of Iran maintains a dual tier exchange rate system. The fixed rate of IRR 42 000 per USD is used to finance imports of essential goods. For other transactions, the current official exchange is IRR 135 000 per USD.

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