AGRICULTURAL production ravaged by drought has been an all-too-common theme across the northern hemisphere over the last twelve months. Unfortunately, Iran is another country to have fallen victim to well-below average rainfall and extreme temperatures during its most recent winter crop cycle.
The Iranian government buys wheat from domestic farmers at a guaranteed price to build its strategic reserves and regulate the market. At the beginning of the crop cycle, the Agriculture Ministry forecast wheat production would reach 12 million tonnes (Mt) and government purchases at 10Mt. In July, total production was revised lower to 10Mt, with government purchases estimated to total 7.5Mt.
By mid-September, purchases from farmers had only reached 4.7Mt, and grower sales had slowed to a trickle. Assuming farmers retain 2.5Mt for their own use and ‘over the fence’ sales, that puts production at 7.2Mt, down almost 50pc year-on-year. Based on government data, Iranian farmers produced almost 14.5Mt of wheat in the Iranian calendar year 1398 (ended March 19, 2020) and just over 14Mt in 1399 (ended March 20, 2021).
With a supply deficit comes imports. In July, Tehran was factoring in wheat imports of around 5Mt, but with lower production, that estimate was revised higher in August to a minimum of 6Mt. However, the harvest statistics suggest that imports of as much as 8Mt may be required before March next year to ensure domestic requirements are met, and the government has enough stock to regulate domestic prices. That would push Iran to fifth by volume on the list of global wheat importers in the 2021/22 marketing year behind Egypt, Indonesia, China and Turkey.
According to Iran’s Ports and Maritime Organisation, almost 2Mt of wheat had been discharged from 122 vessels in the first half of the year (March 21 to September 22). That is an average vessel size of just 16,400t. This suggests that the Caspian Sea trade from Russian and Kazakhstan into the ports of Anzali, Noshahr and Amirabad has been quite active. Imports have reportedly jumped significantly in recent weeks, with as much as 1.8Mt expected to be discharged in October alone.
Barley output was also adversely impacted by the drought, with final production coming in at around 2.5Mt off 1.8 million hectares, well down on the early harvest expectations of 3.7Mt. According to the agriculture ministry, imports are generally around 3.2Mt each year to meet the country’s supply deficit, but that will need to be increased to more than 5.2Mt to meet domestic demand through to March next year.
Iranians are among the biggest consumers of bread in the world. There are around 350 operational flour mills in the country with a milling capacity of 24Mt per annum. Current milling consumption is around 12Mt per year, and total domestic consumption is reportedly around 12.5Mt. Interestingly, domestic demand projections in the latest USDA are much higher at 17.7Mt. I suspect that reality is somewhere around the midpoint after other uses such as seed retention, stockfeed requirements and additions to strategic reserves are built into the equation.
Iran is the largest country in the Middle East and has a long history of agricultural production. It claims to have invented the windmill first used in the Sistan region of eastern Iran, bordering Afghanistan, possibly as early as the mid-seventh century.
Around one-third of Iran‘s land area is suited for agricultural production. However, because of poor soil and lack of adequate water distribution in many areas, most of it is not under cultivation. Only 12pc is planted to food crops, but less than one-third of the cultivated area is irrigated, the balance being devoted to dryland farming.
Wheat, rice, barley and corn are grown on 70pc of cultivated land, with wheat, the country’s main staple, accounting for more than half of total crop production. In the 2017/18 season, Iran was the world’s 13th largest wheat producer at 14.5 million tonnes (Mt).
Drier and hotter
Iran’s winter crop harvest concluded in August with average in-crop precipitation down by 54pc compared with last year and 41pc compared with the long-term average. In addition, heatwave conditions significantly increased evaporation, the combined effect being substantially lower production.
According to Iran’s meteorological service, the months from October 2020 to mid-June 2021 were the driest in the past 53 years, and the average temperature in the country has increased by 2° Celsius since the late 1960s. Meanwhile, rainfall has decreased by as much as 20pc this century alone.
Salinity, desertification challenge
While this year’s drought has slashed winter crop production, it has also exacerbated a number of agricultural production issues that have been building for many years due to the scarcity of water, soil salinity, increasing aridity, poor infrastructure and decades of under-investment.
Around 90pc of Iran’s total water consumption goes into agricultural production. Groundwater is the primary source, but there is a long history of inefficiency in its distribution network, particularly for the agricultural sector. The government has been promoting agriculture and allowing the digging of deep wells, but that has exhausted the available water resources and increased soil salinity.
According to official figures, Iran now has 192 dams, about ten times more than it had 40 years ago. However, in such an arid environment, evaporation rates are incredibly high, and water transportation infrastructure is poor, seriously compromising the efficacy of such investments due to low water use efficiency.
Environmental experts have stated that the current water shortage is also the result of a misplaced perception of agriculture development and progress. The government continues to be focused on short term solutions to maximise self-sufficiency, not least as a response to economic sanctions and pressure from abroad.
The drought aside, the future of agricultural production in Iran is at a crossroads. It remains hostage to recurrent volatility, such as drought, floods, locust infestations, earthquakes. The intense focus on dam construction and tapping the limited groundwater supplies for irrigated crops have exacerbated environmental issues such as salinity and desertification. And it has failed in its goal to improve agricultural self-sufficiency and food security.