Iran Agribusiness Report Q1 2013Published by: Business Monitor International Published: Dec. 5, 2012 - 49 Pages Table of Contents
AbstractFinancial sanctions imposed to pressure Tehran over its nuclear programme are playing havoc withIran's ability to import goods. Food price inflation is picking up, leading to a serious decrease in meatconsumption. The replacement of regular trade for barter can be seen as a feasible, albeit temporary,way of circumventing sanctions to meet demand. Over the longer term, we believe that the continuedinvestment by the government to improve infrastructure - such as the improvement of irrigation systems -will help the country to turn away from its backward agrarian system and will yield results in terms ofbetter-quality grains.Key Forecasts Rice production growth to 2016/17: 14.8% to 1.8mn tonnes. This reflects expectations fordemand growth and efforts to increase self-sufficiency in light of sanctions. Milk consumption growth to 2016/17: 18.3% to 3.5mn tonnes. Milk demand will besupported by government initiatives to boost consumption, as well as by population growth. Sugar production growth to 2016/17: 40.5% to 1.3mn tonnes. This high growth is due to baseeffects. Production will be boosted by domestic consumption. However, although Iran isinstituting plans to increase production out to 2020, we have not yet seen significant progress. 2013 real GDP growth: -0.8% (compared with -3.1% in 2012; predicted to average 1.0% from2012-2017). 2013 consumer price inflation: 45.0% year-on-year (y-o-y) (up from 21.6% y-o-y in 2012;predicted to average 28.6% from 2012-2017). Key Developments Financial sanctions imposed by the US and EU to pressure Tehran over its nuclear programme areplaying havoc with Iran's ability to import goods, including food. Food and consumer items are nottargeted by sanctions, but the sanctions make deals and payments between traders difficult. Iran defaultedon payments for rice from India, its top supplier, in 2012. As a result, some exporters to Iran have stoppedselling rice to the country with the customary 90 days credit for payment. Even payments consideredmore secure, via agents in the UAE, are being affected due to currency fluctuations. That said, we believeIran's imports will be relatively unaffected in 2013, as the country is diversifying its providers, withArgentina exporting to Iran again after a 20-year break. Iranian wheat imports are usually handled by the private sector, but the state has decided to step in to aidpurchasing. The government's goal is to secure stocks and limit food price inflation in order to avoidpublic unrest. The Government Trading Corporation of Iran (GTC), which procures, stores anddistributes basic stables including grains, flour and sugar, is stepping up activity and is able to importfood despite financial sanctions, as shown by the purchase of 1.1mn tonnes of wheat in September 2012.The GTC is contacting traders directly for offers, bypassing the usual method of official tenders. Thegovernment has managed to partially get around payment constraints by using currencies other thandollars and euros as alternative trade finance and by using barter deals involving gold or oil. The Iranian dairy sector is struggling to expand due to structural and infrastructure issues. The milkcollection network has been neglected despite government funds that were allocated to support prices andsubsidise inputs. Smallholders lack the facilities to store and transport milk to major markets, which leavethem at the mercy of traders who offer far less than the government's minimum price for milk. Despitebuoyant demand, there is little investment in the sector. Until infrastructure improves, we expect Iran'smodern dairy sector to remain clustered around large population centres. Get full details about this report >> |
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