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Iran Agribusiness Report Q1 2011
Business Monitor International, Jan 2011, Pages: 44
The Iran Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on Iran's agribusiness service.
The publisher expects production and consumption to expand across Iran's agriculture sector through to 2014/15. This will be largely driven by increased incomes and population growth. Despite this, there are significant challenges ahead as the threat of an end to subsidies looms, potential food price inflation could counter growth due to rising incomes. The threat of disease is also a concern for wheat production and given the largely domestic market for Iranian grain production, a decrease in staple grain availability could have long lasting consequences.
Key Views:
- Rice production growth to 2014/15: 53% to 2.3mn tonnes. Production growth will be a result of demand growth and forecast short-term increases in global prices. However, base effects are a large contributor to production growth as well.
- Milk consumption growth to 2015: 20.4% to 3.3mn tonnes. This will be driven by rising income levels and government efforts to promote consumption.
- Poultry production growth to 2014/15: 30.9% to 1.9mn tonnes. Growth in the livestock sector will be aided by ongoing commercialisation. Once dominated by small holdings, the sector has started to commercialise and this will greatly improve efficiency and production volumes.
- 2010 real GDP growth: 1.2%, down from 1.6% in 2009 and predicted to average 1.8% until 2014.
- Food price inflation: 8.7% year-on-year (y-o-y) in July 2010, down from 15.1% y-o-y in July 2009.
Industry Developments Rising disposable incomes should benefit the consumption of beef at the expense of poultry, as mainly higher-income consumers trade up to the more expensive meat. However, a reliance on imports for domestic beef consumption will keep beef prices too high for many Iranians, to some extent muting income-related trading up. We therefore forecast poultry demand to continue to grow strongly over our forecast period as well. Poultry will benefit from its growing ubiquity and its consumption is rarely confined to special occasions any more.
The government has been active in the local rice market, exercising control over production and imports to control prices. However, government involvement is not viewed as sufficient to encourage producers and consequently the country's import dependency continues to grow. Import tariffs are used to prevent cheaper rice inflows from completely flooding the local market and wiping out the domestic industry. But with Iran reliant on imports and with rice an important staple the government must balance these tariffs and the need to keep rice affordable without dramatically increasing its subsidy spending.
Iran's wheat production is under threat from a new variety of stem rust. The rust can cause up to 100% crop loss, according to the UN Food and Agriculture Organisation, and up to 80% of Asian and African wheat varieties are susceptible to it. It was first discovered in Iran in 2007 in Lorestan and Hamedan in the west of the country. Egypt is exporting 1.5 tonnes of wheat to Afghanistan at no charge to try and slow the spread of the rust there and prevent its arrival in Egypt from the north. Iran is also taking the threat seriously and is attempting to cooperate closely with other countries in the region. However, with the often poor relations between Iran and its neighbours this is not always easy.
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