Abstract
Iranian agriculture has undergone many changes during the last thirty or so
years. Since being
characterised by low productivity, import dependence
from the 1970s through to the mid-' 90s, the
government has actively sought
the creation of a well functioning and self-sufficient sector, not least as
a
way to diversify a largely fossil fuel reliant economy. Subsequent
incentives and state supports - fuelled
largely by oil export revenues -
contributed significantly to the development of the sector as we know it
today; predominantly commercialised and accountable for roughly 80% of
domestically consumed staple
foodstuffs. Yet, despite such improvements, a
series of caveats to further growth must be overcome.
BMI' s latest Iran
Agribusiness Report analyses industry dynamics, while looking at these various
themes.
High oil prices in recent years have enabled Iran to amass large
foreign exchange reserves. However,
such increases in overall domestic
revenues have failed to ease the level of income disparity and
unemployment within the country. In addition, the government' s most recent
five-year development plan
from 2006-2010 - in which agricultural
development is a central theme- is seen to be underperforming.
A
combination of price controls and subsidies on agricultural exports weighs
down the economy, while
reported incidences of corruption and inefficiency
undermine the potential for the private sector act as a
strong engine of
economic growth. Consequently, informal market activity flourishes, while
stock
shortages are common, particularly in the rice and sugar industries,
where the state has a significantly
stronger presence.
In March 2009,
a crowd of disgruntled workers gathered outside the Haft Tapeh sugar grinding
factory in
response to non-payment for services rendered, in a row that
has rumbled on for the best part of a year.
According to sources, workers
from the factory have demonstrated roughly 16 times since 2005, despite
continued intimidation by state forces, and such destabilising fundamentals
serve to hamper the great
promise that exists within the industry. We do
see sugar production expanding to 2013, although at a slow
rate of 1.45%
which is way below the level of the previous projection period of 23.35%, yet
further unrest
among workers may tip the balance into negative growth.
Another major concern for farmers is the drought that has raged through the
region for the best part of
two years, affecting Iran and neighbouring
countries. Grains farmers have been the worst affected, with
wheat in
particular recording notable year-on-year (y-o-y) losses in 2008, falling by
33% as already
scarce water supplies became stretched to the limit.
Despite the negative effects of the drought, the upside
is that it has
strengthened the states resolve to develop irrigation. Domestic area under
irrigated
cultivation has increased significantly over the last five
years, thus helping to improve yields and
lessening the severity of some
of the negative effects associated with water scarcity. Wheat production
should pick up to 2013 as such efforts leads to increased plantings, while
greater use of inputs, such as
fertiliser, will further augment the
government' s efforts to ease its staple import burden. As such, we
foresee
wheat imports playing a smaller role in the domestic food budget during the
course of the outlook.
Having said this, the effects of future droughts
are unpredictable and provide an ever present risk.
Iranian officials have
held talks with other D8 members - most notably Turkey and Pakistan - in order
to
strengthen trade ties. Turkey represents a particularly high potential
trade partner, being self-sufficient in
almost all food groups and, more
pertinently, some of those goods with which Iran still relies on imports.
This is beneficial in that Turkey' s proximity to Iran would allow for food
shipments to be relatively easily
facilitated, which for a country like
Iran, which has alienated a large majority of potential trade partners,
is
a major bonus.
Notwithstanding greater international co-operation,
domestic issues remain the most pertinent concern in
helping to fuel
sector growth. The state' s continual overbearing presence in some subsectors
is deemed
detrimental to private sector investment. BMI believes Iran' s
ability to fulfil its agricultural promise to
2013 depends largely on its
ability to attract outside interests, while potential suitors may become
increasingly attracted to investing in agriculture as a more favourable
climate develops.
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