Focus on Iran

by Chris Lyddon
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Map of Iran

Iran is one of the world’s biggest markets for grain, although its imports are highly variable. The normalization of its relations with the outside world, especially the E.U. and U.S., following a deal on the scope of its nuclear program, is likely to open new markets for grain exporters. The government, however, is targeting self-sufficiency.

The International Grains Council (IGC) put Iran’s total 2015-16 grain production at 19.5 million tonnes, up from 18.8 million the year before. The total includes 13.8 million tonnes of wheat, up from 13 million tonnes. The barley crop is an unchanged 3.8 million tonnes.

The IGC now predicts Iranian 2015-16 imports at 11.6 million tonnes, down from 14.6 million the year before. Wheat imports are forecast at an unchanged 5.3 million tonnes, with maize imports put at 5 million, down from 6.8 million the year before. Iran is also forecast to import 1.3 million tonnes of barley, down from 2.5 million in 2014-15.

The country is forecast to produce 1.7 million tonnes of rice in 2015-16, a figure unchanged from the previous year. Rice imports in 2015-16 are also put at 1.7 million tonnes, down from 1.8 million in 2014-15. The IGC expects Iran to import 1 million tonnes of soybeans in 2015-16, down from 1.5 million the year before, along with imports of 2.5 million tonnes of soybean meal, up from 2.4 million the prior year.

The IGC’s figures for July to May 2014-15 show the European Union (E.U.) as by far the biggest supplier of wheat to the country, shipping 2.51 million tonnes, down from 3.373 million in the same period of the year before. Next comes Russia, which shipped 1.593 million tonnes of wheat to Iran in July-May of 2014-15, up from 806,000 tonnes in the previous year. The biggest supplier of maize to Iran is Brazil, which shipped 4.849 million tonnes to the country in July-May 2014-15, down from 2.671 million in July-May 2013-14.

The biggest barley supplier to Iran in July-May 2014-15 was Russia at 847,000 tonnes, up from 151,000 in the same period a year earlier. The E.U. supplied 422,000 tonnes, having also supplied 151,000 tonnes in the year earlier period. Ukraine supplied 307,000 in 2014-15, with prior year shipments too small to register.

The Government Trading Corporation of Iran (GTC) buys milling wheat on the international market and manages grain storage. The GTC is also responsible for buying part of Iran’s subsidized domestic wheat production.

The State Livestock Affairs Logistic Co. (SLAL), also a government agency, manages much of Iran’s animal feed imports including soybean meal, maize and feed barley.

 “Private importers are also allowed to purchase and import animal feed. However, with the international sanctions in place, government agencies such as GTC and SLAL have had a greater capacity to finance imports than private traders,” a recent analysis by the Australian Export Grains Innovation Centre said. “Private Iranian importers have been impacted by sanctions, with financing options limited and freight operators wary of doing business with Iran.”

Imports held back

The IGC also reported on a change in Iranian policy designed to limit imports. “On July 22, 2015, the government introduced a wheat import duty of IRR1 500/kg ($50/tonne) until the end of 2016, while an equivalent tariff would be applied to barley imports until Sept. 22, 2015,” it said. “The levies apply only to purchases by private sector importers, traders and mills, but not to state import agencies, namely the Government Trading Corporation of Iran and the State Livestock Affairs Logistic Co.”

A report by the Reuters agency said the duties would make imports commercially unfeasible and dashed hopes of a surge in imports after the lifting of sanctions.

There are more than 300 licensed flour mills in Iran, a number which has remained fairly constant.

“As far as the number of mills, the total has stayed the same. However, we have many mills which are renewing their machinery and in some cases increased production,” Merzad Jamshidi, chief executive of KFF Mills and chairman of the IAOM Middle East Africa District, told World Grain.

Jamshidi also explained that the government has partially lifted the subsidy on flat bread by 20% to 50%, depending on the state. The effect has been to push up the price by 200% and reduce consumption.

“However, the subsidized flour/bread is still very available at a price less than a third of a non-subsidized bread,” he said. “Also, this system has created a black market for many flour dealers where they sell subsidized flour for non-subsidized use with huge profit, creating a big drop in mills’ flour sales and thus production.

“All of this has encouraged the Millers Federation to lobby the government to either lift all of the subsidy or bring back the subsidy 100%,” he said. “Given the new parliament election coming up, it’s less likely the government will act on removing the subsidy.”

Flour exports

Jasmshidi also highlighted rising exports of flour to Iraq. “Given the volatile situation on Iraq, flour exports have been on the rise for Iranian flour going into Iraq, in particular in the non-ISIS-held region,” he said. “The Ministry of Industry and the Federation of Iranian millers are pushing to increase the volume, targeting 1 million tonnes of flour exports in one year’s time, especially to Iraq and Afghanistan.

“All that, plus the satisfactory harvest which is still ongoing and the large volume of imports for the past year, has pushed GTC to lower their imports. The rise of the import volume by the private sector has come to a halt due to the $50 import tariff – to be lifted after harvest in October,” he said.

New opportunities for exporters

A paper produced in April by the Australian Export Grains Innovation Centre forecast greater opportunities for exporters as sanctions are eased. “Iran’s neighboring grain exporting countries are positioning themselves to capture a greater share of Iranian grain imports,” it said. “To illustrate this, the Amirabad Port, located in Iran, is a 50-50 joint venture between Kazakh and Iranian partners, and was established for the importation of Kazakh wheat.

“Australia needs to consider the future growth and trade potential of Iran’s wheat exporting neighbors and its impact upon Australia’s exports to Iran,” it advised.

The Australian experts said that Kazakhstan is working closely with Iran to become a supplier of choice. “Iran, Turkmenistan and Kazakhstan opened a railway corridor connecting Iran and the two central Asian countries in December 2014,” the report said. “A railway grain terminal is planned for completion during 2017-18 on the Turkmen-Iran border with the express purpose of facilitating Kazakh wheat exports to Iran.”

However, the USDA attaché in Kazakhstan identified problems in a report on that country’s grains sector, noting that Kazakhstan is only the ninth largest wheat importer into Iran. “Because shipments from Kazakhstan to Iran are currently minimal, use of the new railway connection between Kazakhstan, Turkmenistan and Iran has been limited,” it said. “Additionally, the railway administrations of all three countries need to come to an agreement on their regulations, which is not likely until the second half of 2015.


Key Facts

Capital: Tehran

Population: 81,824,270 (July 2015 est.)

Religions: Muslim (official) 99.4% (Shia 90-95%, Sunni 5-10%), other (includes Zoroastrian, Jewish, and Christian) 0.3%, unspecified 0.4% (2011 est.).

Location: Middle East, bordering the Gulf of Oman, the Persian Gulf, and the Caspian Sea, between Iraq and Pakistan.

Government: Theocratic republic. Chief of state: Supreme leader Ayatollah Ali Hoseini Khamenei (since June 4, 1989); head of government: President Hasan Fereidun Ruhani (since Aug. 3, 2013).

Economy: Iran’s economy is marked by statist policies, inefficiencies, and reliance on oil and gas exports, but Iran also possesses significant agricultural, industrial, and service sectors. The Iranian government directly owns and operates hundreds of state-owned enterprises and indirectly controls many companies affiliated with the country’s security forces. Distortions – including inflation, price controls, subsidies, and a banking system holding billions of dollars of non-performing loans – weigh down the economy, undermining the potential for private-sector-led growth. Significant informal market activity flourishes and corruption is widespread. Fiscal and monetary constraints, following the expansion of international sanctions in 2012 on Iran’s Central Bank and oil exports, significantly reduced Iran’s oil revenue, forced government spending cuts, and sparked a sharp currency depreciation. Iran’s economy contracted for the first time in two decades during both 2012 and 2013, and grew only slightly in 2014. Iran continues to suffer from high unemployment and underemployment. Lack of job opportunities has prompted many educated Iranian youth to seek employment overseas, resulting in a significant “brain drain.” In June 2013, the election of President Hasan Ruhani generated widespread public expectations of economic improvement and greater international engagement. In connection with ongoing international negotiations over Iran’s nuclear program the limited sanctions relief for Iran provided under the Joint Plan of Action of November 2013, helped to forestall the decline in the economy in 2014.

GDP per capita: $17,100 (2014 est.); inflation: 15.8% (2014 est.); unemployment: 11.2% (2014 est.).

Currency: Iranian rials (IRR): 29,859 rials equal 1 U.S. dollar (Aug. 20, 2015).

Exports: $95.71 billion (2014 est.): petroleum 80%, chemical and petrochemical products, fruits and nuts, carpets, cement, ore.

Imports: $61.25 billion (2014 est.): Industrial supplies, capital goods, foodstuffs and other consumer goods, technical services.

Major crops/agricultural products: Wheat, rice, other grains, sugar beets, sugarcane, fruits, nuts, cotton; dairy products, wool; caviar.

Agriculture: 9.1% of GDP and 16.3% of the labor force.

Internet: Code: .ir; 22.9 million users.

Source: CIA World Factbook