Iran Buying Record Volume of Wheat After Worst Drought in 50 Years

EghtesadOnline: Iran needs to buy a record 8 million tons of wheat in the current season, Iranian industry sources said, after its domestic crop was hit by drought.

News ID: ۷۸۷۱۵۰

16 October 2021

However, the jump in imports will coincide with high global grain prices and add to pressures on the country’s finances, Reuters reported.

Bread is a staple in Iran.

Iran’s economy has been hit hard by sanctions imposed by the former US administration as well as the Covid-19 pandemic, making it difficult for Iran to pay for food and medicine.

Higher freight rates are adding to challenges facing the new administration of President Ebrahim Raeisi.

The big increase in wheat imports, from an annual average of about 1 million tons in the last five years, is needed to ensure bread supply as Iran’s wheat crop is expected to be some 30% lower this year, industry sources familiar with the matter said.

The country suffered its worst drought in 50 years during the 2021 growing season, leading international trade house sources to raise their expectations for imports.

Kaveh Zargaran, chairman of the Grain Supplying Association of Iran, a trade body whose members are involved in importing grains, told Reuters the country will need to import about 8 million tons of wheat in the the current fiscal year (March 2021-22). He said about 2 million tons had already been unloaded at the country’s ports.

Ferial Mostofi, president of the Center of Investment and Consultancy Services at Iran’s Chamber of Commerce, said the country’s overall wheat harvest was estimated to be 10-11 million tons, falling short of the annual average of 15 million tons.

“This radical level of increase in wheat imports will impact and severely limit Iran’s ability to import other soft commodities as extensively as previous years, including soy or corn,” Mostofi said.

The comments from the Iranian trade show the situation is more serious than indicated by current crop forecasts for Iran from bodies such as the US Department of Agriculture and the International Grains Council.

The USDA currently projects Iran will import 2.5 million tons of wheat during the 2021-22 season while the IGC estimates that imports will total 2.4 million tons.

Iranian government officials did not immediately respond to requests for comment.

Mohammad Javad Asgari, the deputy head of Iran’s parliamentary agriculture committee, said in July the country was experiencing a shortfall of wheat this year and would separately require large imports of other crops such as corn, soybeans and barley.

Asgari, quoted by Mehr News Agency, said Iran would need to import 5 to 7 million tons of wheat.

Iran will be buying at a bad time, as global wheat prices hit their highest levels since 2013 in August.

The high prices reflect global food security concerns, fueled partly by economic hardship caused by Covid.

The International Grains Council is forecasting a global deficit in the current 2021-22 season (July/June), which will lead to the world consuming more wheat than it produces, leaving less in storage at the end of the year.

“There is no cause for concern about the supply of wheat as an essential commodity because providing such goods is a fundamental issue for the government and it has started taking strong measures in this regard,” Agriculture Minister Javad Sadatinejad told state media in September.

Russian Supply

In recent weeks, Iran has purchased up to 240,000 tons of wheat from Russia, trade sources said.

The United States has repeatedly said food and medicine shipments were exempt from sanctions, but caution by international banks makes it difficult to get Western trade finance.

“Although the US says that import of humanitarian goods are okay, shortages of foreign exchange are hurting,” an Iranian finance source said. “We are under a lot of pressure.”

Iran plans to increase purchases of wheat from Russia using only a small fleet of vessels that operate in the Caspian Sea, the Interfax news agency reported on Sept. 10, citing Iranian Ambassador to Russia Kazem Jalali.

Russian wheat exports to Iran reached 2.4 million tons in the July 1-Sept 27 period, Prozerno agriculture consultancy said in a recent note.

The amount exceeds supplies of Russian wheat to Iran in the entire 2020-21 season, when 1.4 million tons were exported, Prozerno added.