The Market Regulation Headquarters has approved the import of 300,000 tons of oilseeds by Government Trading Corporation of Iran to support local oilseed processing factories.
According to Mohammad Jafari, the head of Iran Vegetable Oil Extraction Industry Association, the imported oilseeds will be distributed among processing factories across the country; the first shipment is expected to arrive in summer.
The capacity of Iran’s oilseed processing factories stands at 5.4 million tons per year.
A total of 2.2 million tons of oilseeds were imported in the last fiscal year (March 2020-21), Mehr News Agency reported.
Vegetable oil production saw a 12.4% YOY decline to reach 1.57 million tons last Iranian year (March 2020-21) – the sharpest decline among 29 commodities under the review of the Ministry of Industries, Mining and Trade.
The vegetable oil market in Iran has been in turmoil, as the country relies mostly on imports for the raw materials. Nonetheless, the government has focused in recent months to meet the domestic need for the staple food in the basket of Iranian households.
Iran produced 215,000 tons of vegetable oils and fats during the month ending March 20, indicating a 24% increase year-on-year, says Yazdan Seif, the managing director of GTC.
“Production stood at 196,000 tons in the month ending Feb. 18 compared with 185,000 tons of the year before. During the month ending Jan. 19, the country produced 177,000 tons compared with 154,000 tons of the same month of the year before,” he was quoted as saying by IRNA.
Noting that Iran’s 93% dependency on raw material and oilseed imports is the main challenge in the way of vegetable oil supply, the official said the first half of last Iranian year [March 20-Sept. 21, 2020] was the toughest time in the history of sanctions against Iran, as it coincided with the outbreak of Covid-19 and problems regarding the provision of foreign currency.
“However, we managed to resolve those problems by tapping into our strategic reserves. At present, 650,000 tons of vegetable oil are available at ports’ warehouses and oil factories, which is adequate for domestic consumption over four months. The monthly consumption of edible oils and fats stands at 150,000 tons,” Seif said.
Government Trading Corporation of Iran provided vegetable oil factories with a total of 2.07 million tons of unprocessed oil, including 1.97 million tons from the country’s strategic reserves, subsidized imports at the rate of 42,000 rials per US dollar by private sector, extraction from imported and domestically-produced oilseeds plus more than 100,000 tons procured before the start of the accounting period in the year ending March 2021.
Vegetable oil factories were supplied with 260,000 tons of raw vegetable oil since the start of the current Iranian year (March 21) to April 14, ILNA reported.
This is while the Ministry of Industries, Mining and Trade's review of the first 11 months of last Iranian year (March 20, 2020-Feb. 18, 2021) shows domestic production of vegetable oil saw the biggest decline (16.2% YOY) among 29 products under the ministry’s review to reach 1.38 million tons.
Outbound Smuggling
Outbound smuggling via eastern and western borders is to blame for the rise in prices of cooking oil, Qasemali Hassani, secretary of Food Wholesalers Union, said earlier in 2021.
“Sadly, the government is in charge of cooking oil production from beginning to end, including the allocation of foreign currency to supply of raw materials to pricing and distribution; the private sector has no role to play in this matter,” he was quoted as saying by IRIB News.
“Prices are set by the government and the cooking oil with those price tags are only being distributed at chain stores whereas as few as 25% of people have access to chain stores.”
Hassani called on officials to stop mandatory pricing and instead pay the cooking oil subsidy, which is at 10 million rials ($40) per head annually directly to the people.
Given the rise in global prices of unprocessed edible oils and other costs, consumer prices of products packaged in PET containers will increase by 10% and those packaged in other types of containers by 13% as per the recent decision of Market Regulation Headquarters.
Referring to the monthly consumption of 100,000 tons of unprocessed oil in Iran, Abbas Qobadi, a senior official with the Ministry of Industries, Mining and Trade, said, “To calm the turbulent market of edible oil, we’ve decided to increase both imports and production of solid fats and step up the distribution of this essential product.”
“Reliance on the import of raw materials, high costs of machinery and their maintenance, and corrupt practices that stem from the government’s allocation of cheap foreign currency are three main challenges facing the vegetable oil production industry,” Abolhassan Khalili, the head of Vegetable Oil Industries’ Association, says.
“Imports meet 90% of demand for unprocessed oil and oilseeds. That makes it all the more important to pursue development plans regarding expansion of oilseed crop cultivation areas more vigorously under current conditions,” he said.
“Manufacturers of production line machinery are based in Europe. Under sanctions, it has become increasingly difficult and costly for producers to purchase and import spare parts.”
Referring to the allocation of subsidized foreign currency at the rate of 42,000 rials per US dollar to import raw vegetable oils by the government, Khalili said, “The policy gives rise to higher risk of corruption in imports and production; the government needs to work out an alternative way to support low-income households.”
Self-Reliance Goal
An estimated 550,000 hectares of farmlands are to go under oilseed cultivation in the current crop year (Sept. 2020-21) to produce 900,000 tons of the crucial crop, up 50%, according to the director of the Agriculture Ministry’s “National Oilseed Project”.
“Based on the ministry’s plan and provided farmers are encouraged to come along, it is estimated that 600,000 tons of colza will be harvested from 350,000 hectares, 200,000 tons of soybeans from 100,000 hectares and 100,000 tons of other types of oilseeds [sunflower seeds, safflower, sesame seeds] from 100,000 hectares across the country,” Alireza Mohajer was also quoted as saying by IRNA.
Mohajer noted that 10 oil extraction factories have signed agreements with the Agriculture Ministry, based on which they can buy directly from farmers as per “contract-based cultivation”.
Factories sign contract-based deals with farmers for colza, soybean and sunflower seeds to be cultivated over 200,000 hectares. The companies will provide seeds, fertilizers and pesticides to the farmers, buy insurance for them and train them in modern farming.
“The government has announced a guaranteed purchase price for oilseeds. Farmers can sell their products to the highest bidder but if for any reason, prices plunge, the Government Trading Corporation will purchase the harvest at guaranteed prices,” Mohajer said.
The provinces of Golestan in the north, Ardabil in the northwest and Khuzestan in the south are the main colza producing regions of Iran.
The government is targeting 70% self-reliance in the production of oilseeds over the next 10 years to keep imports of oilseeds and vegetable oil in check.
“The plan kicked off in late 2015. Oilseed production was 46,000 tons in the fiscal 2014-15,” the official told Young Journalists Club.
Mohajer noted that US economic sanctions have compelled the Agriculture Ministry to accelerate the task of reaching the 70% target.
Per capita vegetable oil consumption in Iran is 18-19 kilograms a year while the global average is 12 kilograms. Iran’s annual demand for unrefined vegetable oil is around 1.6 million tons.
According to Iran’s Vegetable Oil Industries Guild Union, almost 85% of the raw materials for producing cooking oil are imported.
The bulk of imports are palm oil from Malaysia and Indonesia, soybean oil from Argentina and sunflower oil from Ukraine and Russia.
