TEHRAN -- Iran needs to buy a record 8 million tonnes of wheat in the current season, Iranian industry sources said, after its domestic crop was hit by drought, while the jump in imports will coincide with high global grain prices adding to pressures on the country’s finances.
Bread is a staple in Iran and any shortage would be another blow. Iran’s economy has been hit hard by sanctions imposed by former U.S. President Donald Trump 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 faced by the new administration of President Ebrahim Raisi.
The big increase in wheat imports, from an annual average of about one million tonnes during 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 tonnes of wheat in the March 2021-March 2022 year. He said about 2 million tonnes 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 association, said separately the country’s overall wheat harvest was estimated to be between 10 to 11 million tonnes, falling short of the annual average of 15 million tonnes.
“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 U.S. Department of Agriculture (USDA) this week raised its forecast for Iran’s wheat imports to 4.5 million tonnes for the 2021/22 season, from 2.5 million tonnes estimated previously, while the International Grains Council (IGC) has estimated that imports will total 2.4 million tonnes.
Muhammad Javad Asgari, 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 Iran’s Mehr news agency, said that Iran would need to import 5 to 7 million tonnes of wheat.
Iran will be buying at a bad time - with global wheat prices hitting their highest levels since 2013 in August.
The high prices reflect global food security concerns, fuelled 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 a basic good because providing basic goods is an essential issue for the government and it has started taking strong measures in this regard,” Agriculture Minister Javad Sadatinejad told state media in September.
In recent weeks Iran has purchased up to 240,000 tonnes of wheat from Russia, trade sources said.
The United States has repeatedly said that food and medicine shipments were exempt from sanctions. But caution by international banks makes it difficult to get Western trade finance.
“Although the U.S. 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 tonnes 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 tonnes were exported, Prozerno added.
Self-sufficiency in wheat has been a cornerstone of the country’s food security policy in recent years. The former administration of president Hassan Rouhani snapped the achievement last year when Iran imported more than 3 million tonnes of the strategic staple food at a cost of $3.8 billion.
While his government was apt to blame the situation entirely on drought and other climate extremes, some of the responsibility lies squarely on its own shoulders largely as a result of years of what critics say is mismanagement.
One of the reasons for the sharp decline in guaranteed purchases was the low price which the former government offered to Iranian farmers.