BMI Sees Overhaul in Iran Agribusiness Outlook
Economy, Business And Markets

BMI Sees Overhaul in Iran Agribusiness Outlook

The removal of almost all sanctions on Iran’s economy is expected to herald a new era for the country and lead to a significant uptick in economic growth.
Crucially, Iran will be reintegrated into international financial transaction systems and benefit from improved access to funding. The country will also see a gradual return of private investment.
Iran has huge potential across almost all sectors, and agricultural consumption and production is no exception.
The lifting of sanctions will have a significant impact on industries, says BMI Research, which is owned by Fitch Ratings Inc in its latest report on Iran’s agriculture sector.
Below is an extract from the report, including forecasts over the next Iranian years (up to March 2020).
Over the next two to three years, the pickup in economic growth, easing of inflation and easier access to international products will lead to acceleration in food consumption. It will have a rapid positive impact on consumer confidence and on purchasing power.
Iran’s consumer base is attractive, characterized by a scalable and young population, high urbanization, strong demand for high quality products and widespread access to financial services.
Agricultural and food products consumption per capita is also low by regional standards, indicating room to grow, especially regarding sugar, corn, meat and vegetable oils.
Combined with the reintegration of Iran into the global financial transaction system, rapid growth in food consumption will lead to a significant pickup in agricultural imports in the coming years. This will be coupled with a re-diversification in terms of international food suppliers.
Iran has become increasingly reliant on Indian exports in recent years-for both food and non-food products. Now that Iran is able to trade with a larger number of countries, it will most likely look to import from a larger set of suppliers.
Regarding wheat, Iran will most likely increase imports from Russia, given the two countries’ good diplomatic relationship. For rice, Iran will most likely increase imports from Thailand and Pakistan, its main suppliers before the implementation of sanctions.
Brazil will regain market share for corn, sugar and oilseeds at the expense of India. A few countries will also continue to operate as middlemen, especially the UAE, which repackages and reexports other countries’ agricultural produce to Iran.
Iran’s grain production is likely to benefit from easier access to cheaper and higher-quality inputs, which will help improve yields. However, such an improvement depends on the country undergoing key modernization investment, particularly in irrigation, as Iran relies heavily on the vagaries of the weather.
BMI deems the government’s goal to become self-sufficient in wheat next year as overly ambitious.
Iran is showing signs that it is opening up its domestic market to meat imports. In 2015, Iran ended a three-year ban on shipments from Brazil that was implemented after a mad-cow disease outbreak. This bodes well for Brazil’s exports to Iran, given the growing import needs of the country.
In January 2016, Russia reported some of its meat products would soon be allowed for export to Iran. The country imported $533 million worth of meat products in 2014-a large portion of which was frozen beef-compared with $51 million in 2005.
 - Wheat Production Growth to 2019/20: 21.0% to 16.0 million tons. Wheat yields are expected to improve owing to the modernization of technology, including hardier grains variants, greater access to relevant inputs and a larger area of the country benefiting from new irrigation facilities.
 - Sugar Consumption Growth to 2020: 27.6% to 3.1 million tons. Sugar demand will be mainly driven by population growth and improved macroeconomic conditions following the lifting of sanctions in 2016.
 - Poultry Production Growth to 2019/20: 15.2% to 957,000 tons. Growth will be driven by domestic demand and the effects of increased investment.
 - BMI Universal Agribusiness Market Value: $64.03 billion in 2016 (up 3.6% compared with 2015, growth forecast to average 3.6% annually between 2016 and 2020).
2016 Real GDP Growth: 3.8% (up from 0.4% in 2015; predicted to average 4.6% from 2016 to 2020).
 2016 Consumer Price Inflation: 11.0% y-o-y (down from 15.0% in 2015; predicted to average 11.4% y-o-y from 2016 to 2020).

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