Iran is increasing wheat production, such that output stood at 12 million tons in the 2021-22 crop year and rose to 13.2 million tons in 2022-23, according to the US Department of Agriculture.
It is projected to hit 14.5 million tons in 2023-24 to register a 9.85% year-on-year rise, USDA said in its May update.
The report estimates that 6.2 million hectares are under wheat cultivation in Iran.
The Government Trading Corporation, a subsidiary of Iran’s Agriculture Ministry, reportedly purchased several hundred thousand tons of Russian milling wheat recently for April and May shipment. The tender caught most of the market by surprise, especially with Iran’s wheat harvest beginning in May, UkrAgroConsult reported.
News of the deal came as vessels carrying more than 650,000 tons of Russian wheat remain stranded at the major Iranian ports of Bandar Imam Khomeini and Bandar Abbas, unable to discharge due to documentation issues and hard currency payment delays.
The West’s sanctions on Iran over its nuclear program exclude food imports, but the restrictions have severely affected the country’s financial system, necessitating complex and unreliable payment arrangements with its international suppliers. The value of the Iranian rial has dropped significantly against the US dollar since the failure of nuclear talks with the West in September, exacerbating the dire situation.
The recent deal is believed to be a government-to-government agreement that will most likely be executed by a select band of well-connected Russian exporters. As such, the extremely costly discharge delays will be mitigated, as these cheaper shipments will reportedly go straight to the front of the discharge queue.
Food security is a priority for the Iranian government. Drought drastically decreased domestic production in the 2021 harvest, culminating in record wheat imports of 8 million tons in the year to June 2022.
In Iran’s crop year ending August 2022, the Agriculture Ministry reported an increase of 45% in wheat production compared to the previous season. A far more favorable growing season, a 50% fall in the subsidized price for fertilizer and pesticides, and an increase in the planted area following a 130% increase in the government’s guaranteed purchase price were the primary contributing factors.
Wheat is considered a staple in Iran and the government purchases it from farmers every crop year to build up its reserves and regulate supply to the market.
Despite the significant jump in production, wheat imports are still expected to be around 5.5 million tons in the current marketing year, assuming the hard currency issues are resolved soon. In the five seasons prior to 2021-22, wheat imports averaged just 1.2 million tons annually.
Iran was Russia’s third biggest wheat customer in the 2022 calendar year, importing a total of 1.8 million tons, down 55% compared to 2021 shipments of 4 million tons. The biggest importer of Russian wheat last year was Turkey with 4 million tons, down 5.2%, followed by Egypt, which registered a 12.6% rise to 3.5 million tons.
Trailing Iran on the list was Saudi Arabia with 1.5 million tons, up 119%, and Algeria with 1 million tons, up 270%.
