Focus on Iraq
Feb. 23, 2012
Years of dictatorship, war, UN sanctions and more war have left Iraq devastated, its people poor and its infrastructure battered. Feeding the population with basic grains is a struggle for the Iraqi government.
The future, however, may be brighter as an expanding Iraq achieves hoped-for greater affluence.
The U.S. Department of Agriculture (USDA), in a general report on the processing sector, listed a series of woes that face the food industry: “the inability to compete with imported food from neighboring countries; instability; war; government mismanagement and difficulties; poor agriculture productivity and low output; low disposable income; shortage of electricity, water and raw materials.”
However, the same report also pointed out the brighter prospects.
“According to a Ministry of Planning report, the outlook for investment opportunities in Iraq should continue to improve in step with a strengthened security and a more normalized business environment,” it said. “Iraq’s population will boom, reaching about 40 million people by 2025, and perhaps as much as 50 million by 2035. Included in this number is a growing population of young people whose consumption patterns will be similar to those found in the West.”
“Iraq is in the midst of extraordinary changes both economically and politically,” the report said. “In spite of the many challenges to doing business in Iraq, American and European companies have demonstrated considerable interest in Iraq.”
Iraq’s wheat and maize production is too small to register in the reports of the International Grains Council (IGC). Its barley production is put at 1 million tonnes in 2011-12, down from 1.2 million the year before.
The IGC puts total Iraqi grain imports in 2011-12 at 3.8 million tonnes, up from 3.4 million the previous year. Of that import total, 3.6 million tonnes will be wheat, down from 3.4 million the year prior.
For the period Nov. 24, 2011 to Jan. 18, 2012, the IGC reported sales to Iraq of 150,000 tonnes of wheat from Canada and a total of 250,000 tonnes of wheat from Russia, all for January/February 2012 shipment.
Iraq is also set, according to the IGC, to import 1.3 million tonnes of rice in 2011-12, unchanged from the year before.
According to Grain Board figures quoted by Azzaman, Iraq’s rice harvest has dropped to 108,000 from what used to be 200,000 tonnes. It noted that the fall would increase Iraq’s reliance on imports.
“The Iraqi provinces known to have been traditional rice producers – Najaf, Diwaniya and Muthana – have been hit by raising salinity and water shortfalls,” it said.
In a report published Dec. 23, IRIN, the news services of the United Nations Office for the Coordination of Humanitarian Affairs, painted a bleak picture of Iraq’s economy and its food supply situation.
“More than 20% of the population lives below the national poverty line,” it said. “An estimated 2.1 million Iraqis are undernourished. On average, they spend more than one-third of their total expenditures on food, and nearly three-quarters of the population depends on a public distribution system as their primary source for wheat flour.
“The vast majority of the population does not have electricity 24 hours a day, and access to clean water is still limited in rural areas.”
The withdrawal of U.S. troops has changed the situation dramatically.
“In 2009, there were about 140,000 U.S. troops in the country,” IRIN said. “Today, there are only 200. They are there to train Iraqi security forces and protect U.S. diplomats.”
Iraq is located in the dry zone of western Asia and depends mostly on irrigated agriculture, except for the northern part of the country with rain-fed crops.
The Food and Agriculture Organization (FAO) reports that: “Iraq is suffering a severe shortage of water due to climate change, dryer winters and reduced flow in the Tigris and Euphrates rivers due to the construction of dams in neighboring countries, which will lead to 33-million-cubic-meter water shortage by 2015, according to statistics from the Iraqi Ministry of Water Resources.”
Plan to increase wheat crop
Even so, Iraq is ambitious to increase production. According to a report published Jan. 17 by the Bloomberg news agency, citing Saleh Hussein Jabur, director general of state-owned Mesopotamia Seed Company, the country will increase local wheat production by about 74% to 3 million tonnes by 2015. He told the agency that the government plans to triple the annual quantity of wheat seed that it buys from local farmers to 180,000 tonnes in 2015 from the current 60,000 tonnes.
Bloomberg also quoted the director general of Iraq’s grain board, Hassan Ismail Ibrahim, as putting 2010-11 production at around 1.73 million tonnes and consumption at about 4.5 million tonnes. Planned wheat imports for 2012 are 3 million tonnes.
The agency also quoted Musadaq Delfi Ali, director general of Livestock Service Co., as saying that Iraq plans to increase local yellow fodder corn production to satisfy its consumption by 2014 and 2015. It put consumption at about 450,000 tonnes a year, with the harvest at 200,000 tonnes in 2011, up from 90,000 in 2010.
According to the USDA, there are some 200 private sector flour mills in operation in Iraq. Average production capacity per plant is 150 to 200 tonnes a day. There are two public sector flour mills, Al Dora & Taji, both of which have a milling capacity of 1,000 tonnes a day.
Public Distribution System
The Iraqi government provides a monthly allotment of wheat flour, rice, vegetable oil, sugar and powdered baby milk formula to most citizens. To supply the monthly allocation of 9 kilograms of flour and 3 kilograms of rice to 32 million Iraqis, the government has to buy about 4.4 million tonnes of wheat and 1.2 million of rice (milled basis) each year. The purchases come from the domestic and international markets.
“Maintaining adequate PDS supplies is also an indirect way to control food price increases, as approximately one-third of PDS food commodities are sold by recipients to traders for eventual resale into the market,” the attaché commented
The attaché predicted a move to a more market-oriented system.
“Public announcements by the Ministry of Agriculture (MoA) of its intent to provide subsidized feed, rebuild ministry of agriculture-owned poultry operations and increase supplies of subsidized inputs such as fertilizer, indicate movement toward state capitalism and away from a more market-oriented and price responsive agriculture,” the report noted. “Political unrest across the Middle East, including Iraq, will likely preclude adoption of additional market-oriented policies and reforms in the near term.”
The attaché also explained that world market and domestic prices had converged.
“This has important implications for Iraq as price convergence negates the cross-border import of wheat from Iran, Turkey and Syria for sale to the Iraqi ministry of trade and allows the appropriate price differentials between different grades of wheat – removing distortions to the feed wheat market and livestock sector,” it said.
The system has its problems. The Azzaman news service quoted Trade Minister Khairallah Babaker recently as saying that the $3 billion allocated would be insufficient to pay for food purchases for the Public Distribution System.
“The sum is not enough at all, and I hope the Iraqis realize the difficulties we go through to provide them with food rations,” he said.
The allocation came to $8 for every person in Iraq each month.
“With $8 per person per month, we are asked to provide nine kilograms of flour, three kilograms of rice, two kilograms of sugar and one liter of cooking oil for each person in Iraq every month. This is impossible,” he said.
Population: 30,399,572 (July 2011 est.)
Religions: Muslim (official) 97% (Shia 60%-65%, Sunni 32%-37%), Christian or other 3%.
Location: Middle East, bordering the Persian Gulf, between Iran and Kuwait.
Government: Parliamentary democracy. Chief of State: President Jalal Talabani (since April 6, 2005); head of government: Prime Minister Nuri al-Maliki (since May 20, 2006).
Economy: An improved security environment and an initial wave of foreign investment are helping to spur economic activity, particularly in the energy, construction and retail sectors. Broader economic improvement, long-term fiscal health, and sustained increases in the standard of living still depend on the government passing major policy reforms and on continued development of Iraq’s massive oil reserves. Although foreign investors viewed Iraq with increasing interest in 2010, most are still hampered by difficulties in acquiring land for projects and by other regulatory impediments. Iraq’s economy is dominated by the oil sector, which provides over 90% of government revenue and 80% of foreign exchange earnings. Since mid-2009, oil export earnings have returned to levels seen before Operation Iraqi Freedom and government revenues have rebounded, along with global oil prices. In 2011, Baghdad probably will increase oil exports above the current level of 1.9 million barrels per day as a result of new contracts with international oil companies, but is likely to fall short of the 2.4 million barrels per day it is forecasting in its budget. Iraq is making modest progress in building the institutions needed to implement economic policy. In 2010, Bagdad signed a new agreement with both the IMF and World Bank for conditional aid programs that will help strengthen Iraq’s economic institutions. Some reform-minded leaders within the Iraqi government are seeking to pass laws to strengthen the economy. This legislation includes a package of laws to establish a modern legal framework for the oil sector and a mechanism to equitably divide oil revenues within the nation, although these and other important reforms are still under contentious and sporadic negotiation. Iraq’s recent contracts with major oil companies have the potential to greatly expand oil revenues, but Iraq will need to upgrade its oil processing, pipeline, and export infrastructure to enable these deals to reach their potential. The Government of Iraq is pursuing a strategy to gain additional foreign investment in Iraq’s economy. This includes an amendment to the National Investment Law, multiple international trade and investment events, as well as potential participation in joint ventures with state-owned enterprises. Provincial Councils also are using their own budgets to promote and facilitate investment at the local level.
GDP per capita: $3,800 (2010 est.); inflation: 2.4% (2010 est.); unemployment 15.3% (2009 est.).
Currency Iraqi dinar (IQD): 1,165 Iraqi dinars equal 1 U.S. dollar (Jan. 26, 2012).
Exports: $51.76 billion (2010 est.): crude oil 84%, crude materials excluding fuels, food and live animals.
Imports: $43.92 billion (2010 est.): food, medicine, manufactures.
Major crops/agricultural products: Wheat, barley, rice, vegetables, dates, cotton; cattle, sheep, poultry.
Agriculture: 9.7% of GDP and 21.6% of the labor force
Internet: Code. .iq; 9 (2010) hosts and 325,000 (2009) users.
Source: CIA World Factbook