Agricultural production increase fueled by country’s motivation to achieve self-sufficiency and diversification

by Mario Sequeira

In the 25 years since the Iranian revolution, agricultural production has increased significantly. This has been primarily due to strong government support of agriculture as part of its policy to achieve self-sufficiency and, more recently, diversification in an economy heavily reliant on oil.

Iran’s economy is essentially centrally controlled. Government measures that support agriculture have resulted in production largely maintaining a growth of 4 to 6% annually through the past 25 years.

Action directly affecting farmers includes guaranteed purchase prices, access to foreign currency to buy imported machinery, low-interest loans and subsidies for inputs. The government has also improved the economic environment by phasing in liberalization and encouraging privatization.

In 2004-05, the country declared self-sufficiency in wheat. In March, the government announced a one-year, 15 billion Iranian rials (U.S.$1.5 million) pilot plan called the "rice production development scheme," aimed at achieving rice self-sufficiency.

Wheat and rice are two staples that are considered strategic commodities and are targeted for self-sufficiency. Iran’s diverse terrain and climatic conditions enables production of tropical and cool climate commodities, from grains such as wheat, rice, barley, maize, pulses and oilseeds to fruits, nuts and vegetables, including dates, pistachios, sugarcane, rice, apples, cherries and walnuts. Iran is the world’s largest pistachio producer.

The country’s terrain and climate are diverse. Much of it is arid to semi-arid. About 20% of Iran’s land area of 165 million hectares, or about 32 million hectares, is arable. Only about 15 million hectares are farmed, with more than half depending on irrigation and the rest on rainfall.

In fact, one of the biggest constraints to agricultural expansion is not a lack of available land but rather a lack of irrigation. Most dryland farming is carried out in the west and northwest. In central and southern Iran, farming survives on irrigation.

Agriculture remains a strategic sector in Iran’s economy because of the desire to achieve self-sufficiency. The other major sectors — industry and services — have grown at a much faster pace than agriculture.

Today, agriculture accounts for 19% of Iran’s gross domestic product, while industry and services account for 26% and 55% respectively. Agriculture employs 30% of the workforce, while industry employs 25% and services 45%.

Since 1990, Iran’s economy has been managed under five-year plans that have aimed for a gradual move towards a market-orientated economy and development of the private sector.

One of the plans involved the formation of rural production cooperatives to enable farmers to avail themselves of economies of scale. Progress has been slow, but one international report estimated that by 2022 nearly all of Iran’s farms would be part of a cooperative.

The third plan (2000-05) committed the government to an ambitious program of liberalization, diversification and privatization. Major third-plan goals for agriculture included the allocation of 25% of bank loans to water and other agricultural projects, building new water pumps using new technology and upgrading farm machinery. Current mechanization rates in the farm sector are very low.

The latest plan (2005-2010) sets goals of creating 700,000 new jobs and increasing oil output and exports through foreign direct investment.

Some of Iranian agriculture’s most important hurdles are the shortage of water and inefficient irrigation.

Because the water cost to farmers is so heavily subsidized, it is debated that there is not the incentive for farmers to be efficient. According to one newspaper report, only half of irrigated farms run efficient irrigation systems with full or partial control.

Other issues debated in the country’s newspapers include obsolescence of farm machinery, the lack of raw materials, the practice of subsistence farming, waste in the production and distribution cycle, inadequate scientific and technical support to farmers, inadequate capital formation and infrastructure, and degradation of natural resources due to inefficient cropping patterns.

Wheat accounted for 6.4 million hectares of land in the 2004-05 crop year. Of this, 2.5 million hectares are under irrigated farming. The cost of production is high, but the government has opted to promote and protect the industry at all costs in the drive to reach self-sufficiency.

Production has increased by 75% in the past 15 years, more through productivity gains than increased planted area.

For 62 years, Iran imported wheat. But this year, with a harvest of 14 million tonnes, the government declared self-sufficiency and has even approved exports of a small parcel of 200,000 tonnes to Iraq.

Production has increased to meet high consumption, as wheat bread is a staple in the Iranian diet. Per capita wheat consumption was 170 kilograms per year in 2001. Bread is heavily subsidized by the government, second only to fuel.

Demand is expected to increase as the economy grows and gives Iran’s population, 68% of which is between 15 and 64 years of age, higher disposable income.

The milling sector comprises a mix of modern and traditional stone mills and continues to become more sophisticated. According to a 2003 report, the milling industry has a (collective) daily capacity of 50,000 tonnes. Four types of flour are produced in the 284 mills in Iran. The most popular type is used to make Sangak bread, a mild sourdough type of bread. Sangak flour accounts for 45% of production.

The next most common use of flour is for European style breads and other manufactured products, accounting for 25 to 30% of production. The other two flour types are used in the baking of confectioneries and pasta and the traditional flat bread, which is ground at stone mills at close to whole wheat extraction rates.

The industry’s apex body, the Federation of Iranian Associations of Flour Milling, was formed in November 1999 to communicate industry issues.

Iran has two other milling organizations. Research and Engineering Services Inc. is charged with importing wheat and milling machinery and exporting flour. The Self-Sufficiency and Research Center carries out research on milling and baking, production technology and equipment, marketing and flour quality.

Generally, migratory tribes run large herds of sheep and goats, but demand has pushed the growth of large commercial farms. The number of animals (sheep, goats and cattle) in Iran has been reported at about 120 million, of which 8 million cattle and 81 million sheep and goats are grazed on Iran’s 90 million hectares of rangelands by nomadic tribes.

Production has increased significantly in the past 25 years. In 1979, chicken production was 195,000 tonnes annually and per capita consumption was 5.1 kg a year. By March 2005, the figures were 1.1 million tonnes and 17.3 kg, respectively.

Red meat production has increased to 784,000 tonnes annually this year from 375,000 tonnes in 1980. Per capita consumption has increased to 11.6 kg a year from 9.8 kg in 1980.

Milk production has jumped to 6.7 million tonnes this year, a tenfold increase from the 1980 production of 620,000 tonnes. Annual per capita consumption has increased from 69 kg to 99.6 kg

Per capita consumption of animal protein in the country is 22 grams daily. The fourth five-year plan (2005-10) has set a target of increasing that figure to 29 grams daily by the end of the plan. The plan notes that to reach that goal, livestock production would have to increase by an average 6.5% annually over the next five years.

The plan has set production growth targets of 6.5% for chicken meat, 3% for red meat and 7% for dairy production. Barley and maize are the two major components of the feed industry. Feed wheat use has averaged about 300,000 tonnes annually in the past five years. Barley and maize production has not been enough to meet domestic consumption, so the country has been importing these coarse grains. Feed barley demand has been averaging slightly above 2 million tonnes in the past five years while production has been slightly under that, forcing imports. The production of maize, which is the major feed for the poultry industry, has been targeted for expansion by the government. The 2004-05 harvest came in at 1.95 million tonnes, compared to 25,000 tonnes in 1979.