Crop production has increased over the past decades in Iran. The main crops are wheat, barley and maize. Wheat is the most important grain in Iran and accounts for 70 percent of the grain production. Wheat production in Iran is estimated at 16.8 million tons this year, an increase of 20 percent from the five-year average. There are some 350 flour mills operating in Iran with a production capacity of 24 million tons per year.
Iran is an upper middle-income country, with the population of 83 million. The population resides predominantly in urban area where seventy-one percent of the total population is found. The country is bordered by seven countries, namely Afghanistan, Armenia, Azerbaijan, Iraq, Pakistan, Turkey and Turkmenistan. About 52 percent of the country consists of mountains and deserts and some 16 percent of the country has an elevation of more than 2 000 m above sea level.
The country has the next largest economy in the Middle East, after Saudi Arabia with large reserves of natural gas and crude oil. The economy is heavily dependent on hydrocarbon exports and dominated by the oil industry. As a result, economic growth has traditionally been strongly influenced by oil market developments. A goal of Iranian economic policy over the last 20 years or so has been diversification of the economy away from dependence on oil earnings.
Agriculture accounts for some eight percent of GDP, absorbing 19 percent of the labour force. The country is an important agricultural producer, ranking among the top 20 producers in the world for several agricultural commodities, including wheat, barley, chicken and potatoes. The agricultural system in Iran is a combination of traditional and modern systems, and of small self-sufficiency farms, medium sized and large commercial farms. According to the United Nations Food and Agriculture Organization (FAO), Iran’s total cultivated area is approximately 15 million hectares, spread mostly across Iran’s western, northwestern, and northeastern provinces. Around $80 billion worth of agricultural products are produced every year, $75 billion of which are consumed inside the country.
Crop production has increased over the past decades in Iran. The main crops are wheat, barley and maize. Wheat is the most important grain in Iran and accounts for 70 percent of the grain production. The Ministry of Agriculture Jihad declared that Iran’s production of wheat fully covered domestic demand in 2006, but the drought in 2008 and the subsequent fall in production made it necessary to resume import of wheat. In 2008, severe frost and drought caused a sharp drop in production, particularly for grains and legumes, which has not reached the same level again.
Acreage used for grain production has remained between 8,500 and 9,500 hectares since the early 1980s. The increase in production is mainly due to improvements in yield, through modernisation and irrigation, rather than the increase of the cropping area. Water shortage is a serious concern in Iran, requiring more efficient use of water in the agricultural sector. According to FAO, the availability of agricultural land is not a major constraint, but rather the availability of water for the development of these lands.
MAIN STAPLES: WHEAT AND RICE
The food market in Iran combines element of free market and government control. Specifically, the government is concerned with key staples such as wheat, milk, rice and chicken, regulating both prices and import. The government exercise its policies through the Economic Council and Consumer and Producers Protection Organization, and regulates import of commodities that are in short supply. In addition, the government’s Trading Cooperation of Iran plays an important role in the purchase, storage and distribution of key food products.
Wheat and rice are Iran’s two main food staples. Bread made from wheat has traditionally served as the primary source of calories, but per capita consumption, despite ranking among the world’s highest, has remained flat in recent decades. Iran’s rice consumption per capita has gradually risen over time, as rice tends to replace wheat there when incomes rise, though in recent years the growth of rice consumption has declined. Iran is expected to achieve self-sufficiency in rice production in the current fiscal year (ending March 2020). It is estimated that rice production will increase 42% this year to reach between 2.9 million and 3 million tons. This volume will meet the entire domestic demand and there will be no need for imports, according to Iran deputy agriculture minister for planning and economic affairs.
Wheat is Iran’s largest crop by area. Wheat area has averaged around 6.6 million hectares over the last 5 years. Average production was around 13.4 million tons, placing Iran among the top 15 producers in the world. Yields averaged a little over 2 tons per hectare, comparable to those of producers in Russia or Australia. Around 40 percent of Iran’s wheat area is irrigated, with yields of around 3 tons per acre.
20 PERCENT ESTIMATED INCREASE IN WHEAT PRODUCTION
Wheat production in Iran is estimated at 16.8 million tons this year, an increase of 20 percent from the five-year average. Favorable rainfall offset flood-related crop losses experienced throughout the country in March 2019. Government of Iran 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. Iran plans to import 3 million tonnes of wheat this Iranian calendar year, according to the secretary general of the country’s Federation of Food Industry Associations Kaveh Zargaran.
Barley is Iran’s second largest crop by area, averaging about 1.6 million hectares over the last 5 years, with production around 3 million tons, or 1.9 tons per hectare. Rice and corn round out the remaining cereal grains, accounting for around 10 percent of total cultivated area, with yields averaging 4.2 and 6.3 tons per hectare.
Given the physical constraints on its production, along with its rising population and income, Iran relies heavily on imports to satisfy its demand for major grain crops. From 2011 to 2015, the import share of consumption averaged 23 percent for wheat, 29 percent for barley, 52 percent for rice, and 71 percent for corn. Iran buys most of its corn from Brazil, with additional supplies coming from Argentina and Ukraine. Iran’s rice imports originate almost entirely from India. Soy product suppliers include Argentina, Brazil, and India. Over the 2011-2015 period, wheat purchases were spread over Australia, Europe, and Central Asia.
MILLING INDUSTRY IN IRAN
With an area of more than 6 million ha dedicated to wheat, some 350 flour mills, Iran is key grain player in the region. Iranians are the second biggest consumers of bread in the world with a per capita of 160 kilograms per person, which is six times higher than the global average. The annual bread production in Iran stands at 15 million tons. Industrial bread bakeries have a 20% share in the total bread production in Iran while the rest belongs to traditional bread bakers. Only 2% of the total flour share allocated for all bakeries belong to industrial bakeries while the remaining 98% pertain to traditional bakers. Currently, 80% of the flour distributed across the country are subsidized and the rest is supplied at market rates.
In January 2019, a deal among Iran, Kazakhstan and the Russian 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.
The Government Trading Corporation of Iran (GTC) buys milling wheat on the international market and manages grain storage and is also responsible for buying part of Iran’s subsidized domestic wheat production.
Iranian millers buy wheat to GTC and the flour they produced is fortified with iron and folic acid. The almost 350 flour mills operating in Iran have a production capacity of 24 million tons per year vs. 11.5 million tons of local consumption i.e. basically 50% of average use of capacity.
Iran has a greater potential to increase the agricultural production. Efficient use of water resources, reduction of food loss, and further improvement on transportation infrastructure are key issues to be addressed to achieve this.