The Exchange Rate Fluctuation Affect the Agriculture Sector: Deputy Minister

EghtesadOnline: An official of the agriculture-jihad ministry said the exchange rate fluctuations have long term and short time effects on the agriculture sector.

News ID: ۷۵۰۰۲۲

12 May 2020

Hossein shirzad who is also the CEO of the Central Organisation for Rural Cooperatives of Iran (CORC), stated changing the exchange rates due to the free exchange rates, at first, directly changes the price of the imported agricultural inputs that immediately is visible. The second one that is long term is applied through changing the value of the intermediate agricultural inputs.

"In the financial literature, these alternations have been referred to the Exchange Rate Pass-through. The results of a study of the first 21st century, Indicate that exchange rate pass-through in Iran ranges from 32 to 41. Meanwhile, the fluctuation of the exchange rates does not affect the agriculture, industry, and service in the same ways", he added.

Understanding the effects of the exchange rate fluctuations on the agriculture sector requires accurate analysis of the statistical and financial structures, Shirzad asserted, adding that today it has proved that the immediate free exchange rate negatively affects the agriculture sector. Because it makes the economy of the production unstable, aggravates the inflation and decreases the trade. Iran suffers from low production of nine staples including wheat, rice, crude oil, red meat, sugar, beans, cotton, dried milk, and butter, consequently, the free exchange rate affects negatively both the demand and supply sector.

"The livestock inputs including maize, barley, soybean meal should be imported. Moreover, seed, sapling, supplementary, and veterinary and fishery drugs, high technology agricultural machiners should be imported. Due to soil erosion, the cropping sector needs high-value fertilizers including  Triple Super Phosphate and Potassium Phosphate. The free exchange rate could negatively affect the huge sectors of the agriculture.", Shirzad said."

Explaining the dependency of Iran's agriculture sector on the importing, the official said Iran's fishery sector is dependent upon the importing of know-how in the field of trout fish breeding and eyed trout egg. The horticulture needs farming edible mushroom technology, greenhouse facilities, tissue texture for dates, different kinds of herbicides, and fertilizers. He also went on to elaborate that animal farming efficiency is directly linked to the importing of feed production machinery, Simmental bull, milk breeding goat including Saanen, Alpine, and Murcia, Roman meat sheep.

"We should accept that during several years the cropping sector has used mechanization rather than the other agricultural parts. Iran's cropping is severely needed importing hybrid seeds, herbicides (average annual cost 250 million dollars) Veterinary drugs and vaccines, micronutrients including Lysin, Metunin, etc (average annual cost 650 million dollars), and animal farming inputs (average annual  12 million tones). Meanwhile, annually 14 million dollars is paid for importing 35 million tones of the staple goods .", the deputy minister said.

"Confirming the negative aftermaths of the exchange rate fluctuations both on the farmers as well as the final consumers, he said supporting the vulnerable strata against the oppressive sanctions requires adopting an appropriate policy to the gradual free exchange rate. Therefore it is necessary to reduce State interventions through boosting the performance of the participatory –opproach organizations including cooperatives and unions", Shirzad ended.