Sugar Production In Iran Is Forecast To Expand During 2009 To 2013, Although At A Slow Rate Of 1.45%

Aug. 1, 2009 - PRLog -- Iranian agriculture has undergone many changes during the last thirty or so years. Since being characterised by low productivity, import dependence from the 1970s through to the mid-'90s, the government has actively sought the creation of a well functioning and self-sufficient sector, not least as a way to diversify a largely fossil fuel reliant economy. Subsequent incentives and state supports - fuelled largely by oil export revenues - contributed significantly to the development of the sector as we know it today; predominantly commercialised and accountable for roughly 80% of domestically consumed staple foodstuffs. Yet, despite such improvements, a series of caveats to further growth must be overcome.

The latest Iran Agribusiness Report analyses industry dynamics, while looking at these various themes.

High oil prices in recent years have enabled Iran to amass large foreign exchange reserves. However, such increases in overall domestic revenues have failed to ease the level of income disparity and unemployment within the country. In addition, the government's most recent five-year development plan from 2006-2010 - in which agricultural development is a central theme- is seen to be underperforming.

A combination of price controls and subsidies on agricultural exports weighs down the economy, while reported incidences of corruption and inefficiency undermine the potential for the private sector act as a strong engine of economic growth. Consequently, informal market activity flourishes, while stock shortages are common, particularly in the rice and sugar industries, where the state has a significantly stronger presence.

In March 2009, a crowd of disgruntled workers gathered outside the Haft Tapeh sugar grinding factory in response to non-payment for services rendered, in a row that has rumbled on for the best part of a year.

According to sources, workers from the factory have demonstrated roughly 16 times since 2005, despite continued intimidation by state forces, and such destabilising fundamentals serve to hamper the great promise that exists within the industry. We do see sugar production expanding to 2013, although at a slow rate of 1.45% which is way below the level of the previous projection period of 23.35%, yet further unrest among workers may tip the balance into negative growth.

Another major concern for farmers is the drought that has raged through the region for the best part of two years, affecting Iran and neighbouring countries. Grains farmers have been the worst affected, with wheat in particular recording notable year-on-year (y-o-y) losses in 2008, falling by 33% as already scarce water supplies became stretched to the limit. Despite the negative effects of the drought, the upside is that it has strengthened the states resolve to develop irrigation. Domestic area under irrigated cultivation has increased significantly over the last five years, thus helping to improve yields and lessening the severity of some of the negative effects associated with water scarcity. Wheat production should pick up to 2013 as such efforts leads to increased plantings, while greater use of inputs, such as fertiliser, will further augment the government's efforts to ease its staple import burden. As such, we foresee wheat imports playing a smaller role in the domestic food budget during the course of the outlook.

Having said this, the effects of future droughts are unpredictable and provide an ever present risk.

Iranian officials have held talks with other D8 members - most notably Turkey and Pakistan - in order to strengthen trade ties. Turkey represents a particularly high potential trade partner, being self-sufficient in almost all food groups and, more pertinently, some of those goods with which Iran still relies on imports.

This is beneficial in that Turkey's proximity to Iran would allow for food shipments to be relatively easily facilitated, which for a country like Iran, which has alienated a large majority of potential trade partners, is a major bonus.

Notwithstanding greater international co-operation, domestic issues remain the most pertinent concern in helping to fuel sector growth. The state's continual overbearing presence in some subsectors is deemed detrimental to private sector investment. It is believed Iran's ability to fulfil its agricultural promise to 2013 depends largely on its ability to attract outside interests, while potential suitors may become increasingly attracted to investing in agriculture as a more favourable climate develops.

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