Drought and high temperature cut production, forcing Tehran to import record amounts of wheat

To meet needs, Tehran bought eight million tonnes on foreign markets. However necessary, this will weigh heavily on the public coffers because of higher grain prices and freight costs. While the GDP plunges, inflation rises and the economy sinks under the blows of US sanctions.

Tehran (AsiaNews) – Iran has had to buy a record eight million tonnes of imported wheat to make up for this year’s domestic production shortfall caused by high temperatures and low rainfall.

Although imports became necessary to meet local demand, they will weigh heavily on the government’s coffers and the state budget, because they are happening at a time when global grain prices and freight costs are way up.

The volume of wheat will serve to refill up Iran’s strategic reserves as well as meet domestic needs through to March next year.

This will push Iran into fifth position by volume on the list of global wheat importers in the 2021/22 marketing year behind Egypt, Indonesia, China and Turkey.

In the last five years, Iran on average bought about a million tonnes, but this year its wheat crop is expected to be some 30 per cent lower due to the worst drought in the last 50 years, triggering, industry sources note, greater imports.

Speaking to Reuters, Kaveh Zargaran, president of the Grain Supplying Association of Iran, specialised in grain imports, confirms the record volume of imports with two million tonnes already unloaded in the country's ports.

Production this year is set at around 10 million tonnes, well below the 15 indicated as a minimum target, said Ferial Mostofi, president of the Centre of Investment and Consultancy Services at Iran’s Chamber of Commerce association.

As part of its buying spree, Iran recently bought 240,000 tonnes of wheat from Russia.

However, more broadly, wheat imports are tied to the major difficulties the Iranian economy faces under the US sanctions regime over its nuclear programme ​​and the crisis triggered by the COVID-19 pandemic.

According to the United States, food and medicines are not included in its economic and trade sanctions. However, cautious banks and international players make it difficult, if not impossible, for Iran to obtain financing or trade with the West.

“[S]hortages of foreign exchange are hurting,” an Iranian finance source said. “We are under a lot of pressure.”

Meanwhile, the local currency, the rial, continues to drop, trading today at 270,000 against the dollar, far higher than the 32,000 at the time of the signing of the Joint Comprehensive Plan of Action (JCPOA) in 2015.

As a result, Iranians’ salaries and savings have taken a hit; inflation has soared to 45 per cent, the highest level since 1994; while food prices have skyrocketed by nearly 60 per cent.

For some analysts, the causes of the crisis are multiple and overlapping. A shrinking economy, multiple supply chain interruptions caused by the COVID-19 pandemic, and a steady decline in domestic production are at the top of the list.

Between 2017 and 2020, Iran’s GDP lost almost 60 per cent. Gholamhossein Shafeie, head of the Chamber of Commerce, last week described the drop as a “serious warning for the future of Iran’s economy.”

Families and small savers are the most penalised by the increasingly weak currency, forced to give up food once considered basic.

Compared with a year ago, the prices of milk, yogurt and eggs have jumped by nearly 80 per cent, the government statistics agency reported. The prices of vegetables and meat rose by some 70 per cent, while the cheapest basics like bread and rice are up by more than 50 per cent.

• iran
• grain
• stocks
• drought
• economy
• imports
• food crisis
• climate change
• harvest
• agriculture