Supplying cheap food to urban consumers has been the dominant paradigm of policymaking in Iran, which has neglected rural producers, says Hamed Najafi-Alamdarlou, a faculty member of Tarbiat Modares University.
What follows is a translation of his write-up for the Persian-language economic daily Donya-e-Eqtesad:
Iran’s dependency on the import of agricultural essential goods in recent decades has led to the allocation of huge sums of foreign currency reserves to these imports. On the other hand, the lack of optimization of resources and price control have increased the appeal for imports and reduced local farmers’ contribution to meeting local food needs.
As a result, trade deficit of agricultural products, which hovered around 9.4 million tons in the last decade increased to 14.2 million tons in the current decade.
Last [fiscal] year [March 2019-20], imports of agricultural products hit the unprecedented mark of 24.5 million tons, registering a rise of 19.1% compared with the year before and a growth of 40% compared with the year ending March 2017.
Statistics regarding the global prices of essential goods also show a significant increase over the past six months. Soybean, soybean meal, corn and wheat prices have surged by 36%, 41%, 34% and 25% over the period. Although the outbreak of Covid-19 pushed down the prices of some products at the beginning, it then caused a considerable rise in the global prices of these good.
The Organization for Economic Cooperation and Development forecasts that the prices of soybean, rice, corn and wheat will grow in the next 10 years despite their downtrend over the past decade. By 2029, soybean and rice prices are projected to surge by 25% and 12%, respectively, to register the highest and lowest price hikes among essential goods.
There is a significant difference between the prices of imported essential goods to Iran and their global prices.
The country imported $5.2 billion worth of barley, oilseeds, corn and soybean meal last year. The price hike of essential goods in recent months would ultimately lead to a rise in the prices of related products [such as eggs and chicken].
The outlook for global agriculture suggests that essential goods prices will increase in the short to medium term, which would constrain imports. The average price of the imports of the aforementioned four items is 47% more than the global prices. In other words, the import of essential goods costs Iranian taxpayers enormously, as the inflation of food prices is largely to blame on the high prices of imported essential goods.
A change of policies regarding domestic production is vital, given the rise in import costs. For instance, the dependency on animal feed import has turned into the livestock industry’s Achilles’ heel and it’s advisable to reduce the risks of the impacts of price fluctuations on local markets by promoting sustainable domestic production, improving productivity and reducing agricultural waste.
