Tough Year Ahead for Iran’s Agro Sector

EghtesadOnline: Although the agriculture sector had an effective role in Iran’s economic growth in the last Iranian year (ended March 20, 2017), former agriculture minister, Isa Kalantari, believes the new year would be a tough year for Iranian farmers.

News ID: ۷۴۰۷۳۲

04 April 2017

“In my opinion, the new year will be a difficult year for different reasons—low precipitation, limited water resources and the unchanged status of investments in this sector to name a few,” Kalantari was quoted as saying by Mehr News Agency.

Latest statistics by the Central Bank of Iran show the Iranian economy grew 11.9% during the three quarters of the last Iranian year. Without taking the oil sector (which expanded by a whopping 65.4%) into account, growth rate stands at 1.9%, according to the report.

Agriculture production grew by 4.2% during the period.

According to Financial Tribune, the Statistical Center of Iran has put the growth rate for the same period at 7.2% including oil and 5% excluding it. SCI says the agro sector expanded by 5.7%.

According to Kalantari, it’s not clear whether Iran’s agriculture sector can repeat its success in the new year.

“One of the most important problems in this sector is the high cost of agro products. The main reason is the high number of workers,” he said.

According to Kalantari, the structure of Iran’s agriculture sector has not allowed any reduction in the number and costs of workers to this day. Small farmlands and inadequate development of mechanization due to insufficient investment are also among reasons exacerbating the issue of high costs.

Kalantari criticized the role of middlemen in the agro sector and said, “Although last year we had progress, it wasn’t a good year for consumers because they came to purchase the products at high prices.”

In Iran, agriculture is a primary sector and a major source of employment, government revenue, foreign capital and food.

Deputy Agriculture Minister Ali Qanbari recently announced that the strategic reserves of staple foods in Iran are sufficient to meet domestic demand.

A record high of over 14 million tons of wheat were domestically produced last year, more than 11.5 million tons of which, worth over $4 billion, were purchased by the Government Trading Corporation–a state-owned company specializing in the purchase, import and distribution of essential foodstuff from local farmers at guaranteed prices.

The government pays 60 trillion rials ($1.58 billion) in wheat subsidies annually. It paid 12,705 rials (around 34 cents) to local farmers for each kilogram of common wheat and 13,068 rials (around 35 cents) for durum wheat this year and sold each kilogram of flour for 6,650 rials (17 cents) to traditional and 9,000 rials (24 cents) to industrial bakeries.

In other words, the government grants around 6,000 rials (16 cents) for each kilogram of wheat to keep the prices of bread low whereas, according to experts, it can spend the money on agricultural infrastructure and modernization that would ultimately decrease the end-price of wheat production.

“Wheat production in Iran costs about 11,000 rials (29 cents) per kilogram compared to most countries where it costs between 7,800 and 8,000 rials (20-21 cents) per kilogram,” Ali Khanmohammadi, the executive secretary of the National Foundation of Wheat Farmers Empowerment, said.