The private sector can purchase wheat from local farmers at prices negotiated between the two sides, the Ministry of Industries, Mining and Trade announced at the request of Agriculture Ministry.
However, the permit has been granted on condition that they abide by the Industries Ministry’s guidelines, ILNA reported.
In the past, farmers could only sell this strategic grain to the government.
The new development comes as the government’s guaranteed purchase plan for wheat over the past few years has failed to satisfy local farmers.
Every year, the government buys strategic crops, including wheat as well as sugarbeet, tea, barley, cotton boll and oilseeds, from local farmers at guaranteed prices to control prices in the domestic market and fill its strategic reserves.
Last year, after lengthy negotiations and discussions, the government set the guaranteed price of 17,000 rials (around $0.15) per kilo for local wheat purchases. The price was deemed too low by farmers to meet their expectation. Consequently, they abstained from delivering all their harvest to the government.
Aliqoli Imani, the deputy head of National Wheat Farmers Empowerment Foundation, said the government bought around 8 million tons of the grain during the last wheat cultivation season worth 132 trillion rials (close to $1.16 billion).
As such, wheat purchases from local farmers declined by 3 million tons this year. Therefore, the government decided to import this amount of the staple food to replenish its strategic reserves, the official said in November.
Iran was self-sufficient in meeting domestic demand for wheat from 2016-17 to 2018-19 fiscal years.
New Scheme on the Horizon
Ali Khanmohammadi, managing director of the National Assembly of Agriculture Experts, said on Sunday that as of next year, all wheat production will be contract-based.
“Contract-based wheat production or production according to customer orders has already begun this year and 45,000 tons of durum wheat have been cultivated as per this mechanism in the five provinces of Kerman, Khuzestan, Fars, Hormozgan and Lorestan,” he added.
The official noted that customers ordering their desired type of wheat will buy the product at prices 10% higher than the government’s guaranteed prices.
“Based on this scheme, farmers and customers will have to sign contracts encompassing all aspects of cooperation, ensuring that the two sides will get their dues. The contracts will be signed under the supervision of the National Wheat Farmers Foundation,” he said.
Contract-based production, said Khanmohammadi, helps increase the quality of the yields, production efficiency and profits, apart from ridding the government of the financial pressure of guaranteed purchases.
Feeling the Pinch
At present, the government has set wheat guaranteed purchase prices at 22,000 rials ($0.14) per kilogram for the crops that will be harvested in the next Iranian year (starting March 20).,
"If the Economic Council, which has set the price, does not revise this price, we have no recourse other than to import the grain to supply the domestic demand," says the head of National Wheat Farmers Foundation.
“The real price of each kilo of wheat currently stands at 25,000 rials [$0.16]. Any price lower than that will not cover production costs and farmers' expenses. If prices are not raised, the government’s guaranteed purchases will face the same problems as last year's,” Ataollah Hashemi was quoted as saying by Young Journalists Club.
Although Hashemi and other experts in the field warn that next year’s guaranteed prices are low and unsatisfactory, Imani says the government does not have enough resources to buy the amount of wheat it has aimed at for in the next harvest season and is facing a 40-trillion-rial ($263 million) deficit.
“The government plans to buy some 10 million tons of wheat from domestic farmers this year. Given that the price is set at $0.14 per kilo, it will need around 220 trillion rials [over $1.44 billion] worth of resources plus an additional 10 trillion rials [$65.79 million] for the transportation of wheat consignments,” he said.
“Overall, $1.51 billion are needed for next year’s wheat guaranteed purchase plan. Yet, what the government intends to spend is around $815.79 million that comes from the annual budget dedicated for this purpose, $315.79 million and $157.79 million which come from the wheat it will sell to state-owned and privately-run bakeries respectively. This leaves the government with a deficit that worries wheat farmers.”
There are two ways, says Imani, the government could solve the problem. First, it might want to borrow the sum from banks and the other is that it might want to postpone payments to farmers.
“Due to the economic hardships and numerous problems facing farmers, we strictly advise against the latter solution. Even a one-month delay in payments can put wheat farmers in a difficult situation.”
The official noted that wheat harvest will begin in mid-March in the south of the country and urged the government to think of a solution that would benefit all sides.
Though every year, the government promises to make good on its word and tries to pay farmers at a timely manner, yet, not all farmers are remunerated promptly.
Scanty Supply of Urea Fertilizers
Wheat farmers across the country have voiced concerns regarding the scarcity of urea fertilizer.
Since the beginning of the year and on many occasions, petrochemical firms have withheld the distribution of the commodity among local farmers, with their latest excuse being shortage of gas supply.
Agricultural experts say spring is around the corner–the season this fertilizer must be used–and if it is not delivered to farmers, wheat production will be hard hit.
CEO of the Agricultural Support Services Company Hamid Rasouli says a timely use of agro fertilizers will help boost production and prevent cold spells from inflicting hefty damage on the yields.
“Research shows the use of each kilo of fertilizers increases yields from 14 kilograms to 27 kilograms,” he said.
He says the profit earned by petrochemical firms from the export of urea is, in part, responsible for its scarcity in the market.
“We expect these firms to bring their exports to a halt, at least temporarily, and dedicate production to local demand,” he said.
The peak period of using urea on wheat farms is from April 3 to 8 and after this period it would be futile.
Domestic demand for urea stands at 2.2 million tons per year.
