The government’s wheat purchases from local farmers have declined by 3 million tons this year, which will be imported to replenish its strategic reserves, the deputy head of the National Wheat Farmers Empowerment Foundation said.
“The decline in purchases does not indicate a decline in production. There is good evidence that farmers have stored the wheat they didn’t sell to the government. Yet, the decision [to import wheat] has been made since the government wants to ensure there is enough bread to meet domestic demand. If farmers deliver their stored wheat to state purchase centers, the need for imports will be eliminated,” Aliqoli Imani was also quoted as saying by the Young Journalists Club.
He said that the government will need around 80 trillion rials ($709 million) to import this volume of wheat and suggested that this money can be used to make domestic purchases instead.
“This way, local farmers will benefit and the sum put away for imports can be used for domestic production,” he said.
Iran has been self sufficient in supplying its domestic demand for wheat since 2016.
A record high of 14 million tons of wheat were domestically produced in 2016, more than 11.76 million tons of which worth over $4 billion were purchased by the government from local farmers at guaranteed prices.
This helped Iran achieve self-sufficiency in wheat production for the first time after about a decade.
There have been no wheat imports for domestic consumption since Rouhani was elected president. This is while Iran imported 5.7 million tons of wheat the year before Rouhani took office.
Iran has until now imported wheat only to reexport its processed byproducts.
Last year and after prolonged discussions, the government set the guaranteed price of 17,000 rials (around $0.15) per kilo for local wheat purchases. The price did not, by any means, meet the satisfaction of farmers since it did not cover their production costs, nor their living expenses. Therefore, they abstained from delivering all their harvest to the government.
Experts warn that if the guaranteed purchase price remains low and does not rise on par with the annual inflation and increasing production costs, farmers will do the same in the next harvest season and the government will face a bigger problem.
Every year, the government buys strategic crops, including wheat, from local farmers at guaranteed prices to control prices in the domestic market and fill its strategic reserves.
Imani noted that the government bought 8 million tons of the grain in the last wheat cultivation season worth 132 trillion rials ($1.16 billion).
The official said this year 6 million hectares of farmlands are estimated to go under wheat cultivation.
“More than 2 million hectares of our rain-fed farms and between 500,000 and 600,000 hectares of irrigated lands have been cultivated, which account for 50% and 30% of the plan set by the Agriculture Ministry for such farms respectively.”
According to Ataollah Hashemi, the head of the National Wheat Farmers’ Foundation, wheat cultivation season started around Sept. 11 in northwest Iran.
“The country is estimated to produce more than 12 million tons of the staple grain in this crop year,” he was quoted as saying by Mehr News Agency.
According to Food and Agriculture Organization, Iran is the 11th biggest wheat producer in the world.
Trilateral Deal on Wheat Trade
The agriculture ministries of Russia, Kazakhstan and Iran concluded a trilateral agreement on the issue of wheat trade earlier this year.
The agreement was the result of negotiations leading to the formation of a free trade zone between the Eurasian Economic Union and Iran, Zol.ru reported.
Veronika Nikishina, EEU trade minister, was quoted as saying that the signing of a memorandum between Russia and Kazakhstan-key suppliers of wheat to the world market-and Iran will be the first step towards the revival of full supply chains of high-quality wheat from EEU to Iran and the whole region.
"We need to consider this event in the context of preparations for the entry into force of the interim agreement signed in May 2018. Belarus, Kyrgyzstan and the Russian Federation have already ratified the agreement," she said.
"We are convinced that cooperation with Iranian partners is promising and ready to continue the dialogue in various directions of trade and economic cooperation."
The Preferential Trade Agreement between Iran and Eurasian Economic Union came into effect on Oct. 27.
“The agreement is a prelude to free trade with Eurasia. Preparations for free trade with the bloc will begin after one year of implementation, following which there will be a two-year window to conclude negotiations," Hamid Zadboum, the head of Trade Promotion Organization of Iran, told Fars News Agency.
Iran and EEU are looking to substantially increase trade. The two sides signed a three-year provisional agreement in Astana, Kazakhstan, on May 17, 2018, for the bloc to welcome Iran into EEU.
The average tariff set by the union on Iranian goods as part of the agreement stands at 3.1%, while the figure is 12.9% for EEU goods exported to Iran.
Iran and EEU have listed 862 types of commodities in their provisional agreement, based on which Iran will enjoy easier export terms and lower customs duties on 502 items and the same goes for 360 items from EEU member states.
In accordance with the aforementioned memorandum, wheat from Russia and Kazakhstan will be supplied to Iran without customs duties and other fees equivalent to it. In addition, Iran will allow the transit of wheat through its territory and support wheat import as part of the implementation of swap contracts.
It will also ensure that existing or future bans, quantitative and other restrictions on the use, marketing, sale, supply and sale of wheat to Iran will not apply to wheat temporarily imported into Iranian territory for further processing and export.
If Iran’s legislation in this regard were to change, the Russian Federation and Kazakhstan should be immediately informed about this.
For its part, the Russian and Kazakh sides will support the development of a mechanism for providing credit lines to Iranian buyers for buying wheat, and guaranteeing that the wheat delivered to Iran meets its sanitary and phytosanitary requirements.
The parties to the agreement plan to create a joint tripartite working group that will address issues related to the supply of wheat in accordance with the memorandum. It is assumed that the group will meet at least once a year. The memorandum is designed for five years.
According to Deputy Agriculture Minister of Kazakhstan Gulmira Isaeva, the republic has the opportunity this year to supply from 500,000 to 1 million tons of wheat to Iran.
In March 2016, Iran imposed a ban on the import of wheat and in subsequent years, deliveries were made only on certain permits and individual contracts.
Prior to this, according to the data of Rusagrotrans JSC, in the crop year of 2014-15, Russia supplied 1.7 million tons of wheat from Iran’s total imports of 6.3 million tons and 1.4 million tons out of 3.5 million tons in 2015-16. In the 2017-18 crop year, exports declined to 131,000 tons from 200,000 tons.
